Get The Facts
Air Passenger Duty (APD) is the UK Government tax that is charged on all passengers departing from a UK airport. Some things you might not know about APD:
- Introduced in 1994, it was originally just £5 per person for short-haul flights, and £10 elsewhere.
- Successive governments have increased APD, so that passengers now pay up to £188 on long-haul flights.
- A typical family of four will pay an average of almost £120 this year in APD.
- In February 2013 PwC published major new research which found that significantly reducing or abolishing APD would result in a significant increase in the UK’s Gross Domestic Product and would result in the creation of tens of thousands of new jobs. It also found that reducing or abolishing APD would actually increase the revenues to the Treasury from other taxes so much that it would pay for itself – increasing the money flowing into the Exchequer.
- With effect from 1 January 2013 the Northern Ireland Assembly legislated to set devolved APD rates (Bands b to D) at £0 due to the damage caused to local businesses and jobs. Continental Airlines acknowledged that they would have abandoned flights from Belfast to the US if APD rates from Northern Ireland hadn’t been reduced.
APD plays an important role in raising tax receipts for the UK’s public finances, so isn’t it necessary at this time of austerity?
APD raised £2.8 bn in 2012-13, making an important contribution to the UK’s public finances. However, we’re concerned about the wider damage that the tax is having on the economy. The PwC research (see ‘How it Affects You’ section) actually suggests that reducing or abolishing APD would pay for itself.
Unlike many other countries, the UK does not pay VAT on domestic flights. Therefore, don’t we compare favourably in international comparisons of the tax burden on consumers?
While the UK does not levy VAT on domestic flights, international air travel from many other countries is generally VAT-exempt. Indeed, under EC law, all international passenger services from EU member countries are VAT-exempt. Bearing in mind that APD is imposed on all domestic flights and international flights leaving from a UK airport, it’s difficult to argue that not paying VAT on domestic flights alone compensates for current APD rates. For return flights within the UK, the tax has to be paid twice as the passenger “departs” twice.
Unlike other modes of public transport in the UK, aviation doesn’t have to pay fuel duty. Doesn’t this put aviation at a competitive advantage?
The aviation industry doesn’t enjoy the benefits that many other public modes of transport do, particularly in the form of subsidies. In 2011/12, for example, the rail industry was subsidised by nearly £4bn a year, with bus and coach companies subsidies amounting to £2.3bn. Bus operators also receive a range of other subsidies and grants that reduce their operational costs. If we look at the ferry industry, they are also exempt from fuel duty, but pay no passenger duty of any sort. APD simply adds to the cost of flying compared to other forms of transport.
You say that APD is bad for families, bad for jobs and bad for growth, and that’s why countries such as Holland and Denmark have scrapped their tax. Yet there are some other European countries that still levy their own air passenger taxes.
Only five other European countries levy a comparable tax (Austria, France, Germany, Ireland and Italy), none of which comes close to the cost of APD. A family of four travelling on a trip from the UK to China has to pay £332 in APD when they depart, compared to air passenger taxes of around £40 from France. At the start of 2013 Germany froze its air passenger tax after the German federal Government published a study on the economic effects of the tax, concluding that two million passengers didn’t travel in 2011 due to the higher air fares. If Germany is already experiencing the downsides of a tax they introduced just three years ago, it begs the question just how large the impact of the highest aviation tax in the world is on the UK’s economy.
Is there any evidence to show that APD is having an adverse effect on the UK’s economy?
There are a number of strong indicators:
- The PwC report which found that reducing or abolishing APD would result a) in a significant increase in the UK’s Gross Domestic Product and b) would increase the revenues to the Treasury from other taxes as a result of this increased economic stimulus – in other words it would actually pay for itself.
- Research by The World Travel and Tourism Council estimates that the UK’s APD cost the economy 91,000 jobs and £4.2 billion in additional revenue in 2012 alone.
- The commercial damage to the UK’s aviation industry attributed to the tax: Air Asia X blamed ever-increasing levels of APD for its recent decision to abandon flights to UK destinations, while Continental Airlines acknowledged that they would have abandoned flights from Belfast to the US if APD rates from Northern Ireland hadn’t been reduced. These two examples indicate that APD is having an impact on passengers’ decision-making. What’s more, the World Economic Forum has placed the UK 139th out of 140 countries in terms of tourism competiveness with respect to air taxes and charges, with only Chad being placed lower
Air travel is a contributor to the UK’s greenhouse gas emissions, so isn’t APD one way for the aviation industry to pay for its environmental footprint?
The industry is far from complacent about the environmental impact of aviation. The UK aviation industry recognises the contribution it makes to greenhouse gas emissions, and is continually implementing ways to improve operational efficiencies and aircraft and engine technology to limit its carbon footprint. However, aviation’s contribution to global carbon emissions should be put in context. If we grounded every UK flight it would cut global man-made CO2 emissions by 0.1%. All UK domestic and international aviation accounts for around 6% of UK CO2 emissions compared to 31.1% from power stations and 21.6% from road transport. What’s more, APD is not an environmental tax – something the Government has now made clear. Indeed, our high APD rates have the effect that inevitably some people are incentivized into taking connecting flights via European airports such as Amsterdam to avoid APD rather than fly direct – and this actually results in more emissions.
The Government doesn’t seem to be budging on APD – so why go to all this effort to campaign?
Firstly, because – quite simply – we believe it is an unfair and damaging tax and that shining a spotlight on a tax that is higher here in the UK than in any other country in the world is the right thing to do. Secondly, the campaign is having traction. Nearly 30,000 people are following us on Facebook – testament to the huge opposition there is to APD. Thirdly, thanks to our campaigning we know that policy-makers are concerned about this tax. More than 100 MPs have now called on the Government to review the economic impacts of APD and we have dramatically raised the profile of the issue amongst elected policy-makers. As Conservative MP Adam Afriyie said in the House of Commons recently, “Of all campaigns in this Parliament, I have received the highest level of communication from my Windsor constituents about the air passenger duty, and that says a lot”.