Budget: Good news on private jets, but otherwise a wasted opportunity

23rd March, 2011

The Aviation Environment Federation (AEF) has welcomed the Chancellor’s plan to tax private and business jets. But otherwise , the budget represents a wasted opportunity to introduce fairer taxes. See Chancellor’s statement and AEF Press Release below.

Chancellors’ statement

“We hoped we could replace the per passenger tax with a per plane tax.

We have tried every possible option, but have reluctantly had to accept that all are currently illegal under international law.

So we will work with others to try to get that law changed.

In the meantime, we are consulting today on how to improve the existing and rather arbitrary bands that appear to believe that the Caribbean is further away than California.

We will also seek to bring private jets, which pay no duty at all, into the scope of taxation. The wealthiest should not escape the tax the ordinary holidaymaker has to pay.

And I can tell the House that with the hefty duty rise last year, and with the cost pressures on families, we think it would be fair to delay this April’s Air Passenger Duty rise to next year.”

AEF press release  

Budget: Move on private jets welcome, but otherwise a wasted opportunity

The Aviation Environment Federation (AEF) has welcomed Chancellor George Osborne’s plan to tax private and business jets. [note 1]

AEF Director, Tim Johnson, said: “When ordinary people on business or leisure trips have to pay tax, it is clearly unfair and inequitable that exclusive and highly polluting private and business jets are not taxed. We therefore welcome the plan to tax them.”

However, the Chancellor announced that the government would not be replacing Air Passenger Duty with a per-plane tax, despite having pledged to do so in the Coalition Agreement in May 2010. [note 2]

Tim Johnson said: “We are disappointed that the very public commitment made by the Government to replace APD with an aircraft-based tax has been dropped without any consultation on how obstacles to its implementation could be overcome. [Note 2] This means that freight transport and transfer passengers will continue to escape paying any tax. We are calling on the Government to find a way to close these loopholes.”

Although it was widely expected that APD would not be replaced by a per-plane tax, a rise in APD rates had been forecast in some quarters. However, the Chancellor deferred any increase.

Tim Johnson continued: “In the absence of reform, an increase in APD rates is urgently needed. This would be a step towards making the aviation industry pay for the environmental costs such as noise and CO2 emissions that it imposes and to make a fair contribution to the nation’s finances. The present tax – around £2.3 billion pa – is well short of what would be required to equalise aviation taxes with other sectors of the economy. For instance, if aviation fuel were taxed at the same rate as petrol, this would raise £10 billion pa.”

Notes

1. A consultation on reform of APD (Air Passenger Duty) has been launched. This contains a section on business aviation.

2. The Chancellor said that the proposed per-plane tax would be illegal. AEF understands that legal action from foreign governments or airlines was feared because the per-plane tax has similarities with a fuel tax. Taxing aircraft fuel is prevented by certain international agreements, although there is not a blanket ban. The legal situation is not clear-cut.

Consultation

Although no changes were made in the Budget, the Chancellor announced a consultation on the reform of APD.