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Reform aviation taxation to accurately reflect aviation’s environmental cost, campaigners tell Treasury

18th October, 2021

In a joint letter to the Chancellor, AEF, T&E, Tax Justice, Green Alliance, Bellona and Greenpeace have called on the UK Government to reform UK tax in order to better reflect the environmental costs of aviation. The letter has been sent in advance of the Autumn Budget and Spending Review plans which expected to be announced soon.

Since 1990, UK’s aviation’s emissions have increased by 125%, in stark contrast to the UK’s overall emissions which have decreased by 43% over the same period. In 2019, aviation emissions were higher than ever before. This is, in part, as a result of the lack of taxation the industry faces. Following the Government’s decision to include international aviation and shipping in future carbon budgets, we need immediate taxation reforms. 

Our letter sets out a series of recommendations, including:

Kerosene tax

Airlines do not pay taxes or excise duties for the kerosene fuel that they uplift in the UK. The UK should at least match the European Commission’s proposal to apply taxes to all flights within the EU at a rate of €0.38/ litre. 

VAT on tickets

VAT is not applied to airline tickets. This places a first class flight in the same untaxed category as essentials such as food and medicine. Most goods in the UK, including petrol, are taxed at a rate of 20%. VAT should be immediately applied at the full 20% rate on all first, business and private jet tickets.  

Non-CO2 charges

Aviation produces other emissions which cause significant additional warming effects, including contrails and nitrogen oxides. As a result, aviation’s climate impact is estimated to be 3x higher than the impact of its CO2 emissions alone. An additional charge is needed to recognise the warming caused by non-CO2 effects, and applying such a charge would be world-leading. 

Applying our suggested reforms will incentivise UK aviation to invest in technological and other changes necessary to reach net zero, as well as raising funds that can be spent on decarbonisation initiatives. The reforms will help to deliver future carbon budgets, and keep the UK on track to deliver our crucial shared 2050 goal, the letter concludes.

To read the full letter, click here.