Reform of aviation tax – consultation

25th March, 2011

The Chancellor announced in the Budget on 23rd March that there would be no immediate change in aviation tax. See news item. However, he did announce a consultation ‘Reform of air passenger duty’.

The text of his budget statement was as follows.

Air Passenger Duty

1.152. In the June Budget 2010, the Government undertook to explore changes to the aviation tax system, including switching from a per-passenger to a per-plane duty. The UK’s international obligations in this area include Air Service Agreements with over 150 different countries and the 1944 Chicago Convention. The Government will not introduce a per-plane duty at the present time, given concerns over the legality and feasibility of this approach. The Government will start a programme of intensive work with our international partners to build consensus for a per-plane duty in the future.

1.153. Today the Government is launching a consultation on reform of Air Passenger Duty. The Government wants a simple tax system for air transport services which does not hamper growth, which ensures a fair contribution toward the public finances and which will support the reduction of global emissions. The consultation includes plans to extend the tax system to flights taken aboard business jets for the first time. The Government will also freeze Air Passenger Duty rates for 2011-12, with the RPI increase assumed in the forecast deferred to April 2012.

It is encouraging that the government says specifically that tax should make “a fair contribution toward the public finances” as well “support the reduction of global emissions“. Aviation industry lobbying has been along the lines that ADP already covers the cost of carbon emissions and should thus not be increased. Thus – by implication – aviation should not cover the cost of its non-carbon emissions (as much or more as carbon) and nor should make a general contribution toward the public finances.