The Smith Commission announced on Thursday (27/11/14) that control over Air Passenger Duty for flights from Scottish airports would be devolved to the Scottish Government. As the Scottish National Party has already committed to reforming and eventually abolishing APD, the announcement means that the tax could be scrapped on flights from Scottish airports.
Regional airports in England fear this could negatively impact them and International Airlines Group CEO Willie Walsh has warned of flocks of people “rushing across the border” to board a flight from Edinburgh airport.
Control of APD was devolved on long-haul flights to the Northern Ireland Assembly in 2012 and then set at £0. However, EU tax laws mean that the duty on short-haul flights to EU destinations cannot be set variably within the same member state, suggesting there could be legal obstacles ahead for the devolution of APD in Scotland.
As we highlighted in a recent blog, aviation pays no VAT or fuel duty, a shortfall for the treasury of around £10 billion. In comparison, Air Passenger Duty raises around £3 billion each year.
Air travel is comparable only to car travel in its environmental damage and yet is exempt from paying VAT and fuel duty.