Passenger Tax Rises

AVIATION EXECUTIVES have hit out at the UK Government’s decision to proceed with pre-announced plans to increase Air Passenger Duty (APD) on all flights leaving the country, a move they claim will ultimately damage the economy and make the UK a less competitive place to fly from.
APD is a tax that is payable by all passengers travelling from a UK airport onboard an aircraft of more than 20 seats.  It was first introduced in 1994, at the rate of £5 (US$7.80) for European destinations and £20 (US$31.20) for elsewhere but over the last three years there has been a succession of increases culminating from November 1, 2010, with passengers departing the UK being charged up to £170 (US$265) in tax, depending on their destination and class of travel.
Industry executives claim the latest rise will undermine the government’s policy of strengthening business links with the rest of the world since many competing hubs do not levy similar charges.  They also claim that increases in duty will make the UK less attractive as a tourist destination.  As an example they highlight that it costs a family of four at least £300 more to travel from China to London than China to Paris or Frankfurt.
“While we must all play our part in the recovery, we need sensible tax policy that doesn’t stunt growth and damage our competitiveness as this does.  Ultimately, increasing APD will hurt consumers and businesses alike as it makes it more expensive to fly from the UK compared with other countries,” said Colin Matthews, Chief Executive of airport operator BAA.  “The knock-on effects of this will be longstanding and bigger; more environmentally-efficient jets will not be able to fly from our airports if passengers decide they can only afford to fly long-haul from our European neighbours instead.”
The UK is not alone, Austria has become the latest European country to impose a departure tax on airline passengers, a decision that Association of European Airlines (AEA) Secretary General Ulrich Schulte-Strathaus believes could back-fire on the Government.  “If the intention is to boost fiscal revenues, I fear that the Austrian Government may find that it has got its sums wrong,” he said.  “They should learn the lesson of the Netherlands, which abandoned its own passenger tax in 2009 after just 12 months, when it was discovered that it had cost the economy a billion euros, in return for just €300 million (US$393.5m) in revenues.”  The Austrian Government will impose a €8 (US$10.5) charge for short-haul journeys and €40 (US$52.5) for long-haul, but as was the case in the Netherlands, analysts believe passengers may choose to avoid the tax by driving to a foreign airport, in this case Bratislava in Slovakia, less than an hour’s drive away.

Historical Rises in UK Aviation Tax
  1994 2007 2009 2010
Economy short-haul £5 £10 £11 £12
Economy long-haul £20 £40 £55 £85
Premium short-haul £10 £20 £22 £24
Premium long-haul £40 £80 £110 £170
APD receipts £84m £1,994m (+105.4%) £1,856m (-6.3%)* £2,300m (19.3%)
Source: BAA
Note: *due to the recession UK air passenger figures dropped by 7% in 2008/09