By Mark Smulian | 19 August 2013
Airline passenger duty has been increased sharply even though the government has little idea of its economic impact, a parliamentary report has said.
The All-Party Parliamentary Group for Aviation said airline passenger duty (APD) called for research to determine whether it is detrimental to the overall economy, as the aviation industry has claimed.
MPs on the group – which is not a select committee – issued their report today titled Inquiry into aviation policy and air passenger duty.
Committee chair Brian Donohoe said: ‘To achieve the greatest possible economic and social contribution from aviation, we need two things from government: a forward-looking aviation policy that allows for aviation growth; and a new approach to the taxation of aviation.
‘Combined, a new approach could not only energise the sector but also provide a firm foundation for the UK’s economic recovery.’
The group noted that the UK’s APD rate was the world’s highest, ranging from £13 for an economy flight within the European Union to £184 for a non-economy flight to Australia.
It criticised the Treasury for increasing APD while not knowing its impact.
‘We find that there is no evidence that the recent increases in APD have been based on a thorough modelling of the impacts of APD on the UK economy,’ the report said.
‘Rather, it would seem that that increases have been imposed simply because it is a successful means for the government to raise much needed revenue.’
Evidence submitted from the World Travel and Tourism Council suggested removing APD would result in an increase to the UK economy of up to £4.2bn per annum in gross domestic product and create 91,000 jobs by generating more inbound tourism.
The report called for research on APD’s impact on travel behaviour, economic growth and employment and how it affects airfare levels.
APD raised £2.6bn for the government in 2011/12 and receipts are forecast to rise to £3.9bn a year by 2016/17. The Treasury favoured APD because it is easy to administer and collect and hard to avoid.
The committee said: ‘While the ease... in collecting a tax is relatively attractive to government it is not a rationale in itself for imposing it.
‘There have been very large increases in APD over the last five years which have vastly exceeded the rate of inflation and the government has not provided any rationale for these increases in terms of either altering adverse behaviour or more fairly apportioning the tax burden. Neither has it shown the consequence to UK plc and its relative competiveness.’
The MPs dismissed the argument that raising APD was justified by deterring overseas travel in favour of domestic UK tourism, since it in turn deterred overseas visitors who would pay it on their return flights.
They also said APD now greatly exceeded the environmental costs of aviation.
Only six other EU states levy the tax at all, and all at significantly lower rates.
