Taxation / APD
The threat to increasing Air passenger Duty (APD) further is very real and BAR UK is constantly engaged in the lobbying efforts to reduce this excessive tax burden on airline customers. BAR UK is proposing a fundamental review of APD in conjunction with the Jet-Zero Council sustainability recommendations. APD has no environmental credentials in its current form.
BAR UK has played a central role in lobbying the UK Government to reform APD with three major wins so far for the industry;
- Removal of double taxation on return domestic flights from 2023
- Suppression of increases to Band B countering intense pressure at COP26 from environmental groups
- Exemption extended to Children aged 12-16 years effective 01 March 2016
- Scrapping of bands C and D effective 2015
Why APD distorts competition and damages the UK economy
As an island nation, the UK is heavily dependent upon aviation to maintain its global connectivity with some 72% of visits to the UK arriving by air. Yet rather than fully embrace this global connectivity, the UK imposes the highest air passenger tax in the world - damaging economic growth and jobs. A PwC report (2013 and 2015 update) highlighted the financial cost burden to UK exports – including tourism, jobs and growth across the wider economy, are far greater than the £3.4bn raised annually in APD. The damage has only escalated since then..
APD puts constraints on inbound tourism and business and is a huge incentive for overseas visitors to choose other European countries instead of the UK.
Aviation is unfairly targeted relative to other transport modes
A tax introduced in 1994 at just £5 for EU destinations and £10 for the rest of the world has since been regarded by successive governments as an effective revenue raiser and increased by up to 1360% (£10 to £146 Band B standard rate) since its inception. Passengers travelling by other transport modes do not pay any such tax and, indeed, receive huge subsidies (including over £5bn annually for rail, and £2.5bn for buses). After more than 20 years, this tax has lost any shred of economic justification.
APD delivers no environmental or infrastructure benefits
APD is not an environmental tax. Unfortunately the significant revenues generated by APD are not in any way hypothecated into environmental or aviation infrastructure but simply go into general Treasury funds. In fact, unlike other transport modes, aviation funds its own infrastructure in the UK - including air traffic control, airport infrastructure, and indirectly even makes large financial contributions to link surface transport to airports. In respect of aviation emissions, CORSIA developed through ICAO is a global environmental deal to replace national and regional measures that will ensure the airline industry can play its part in tackling climate change.
A reduction in APD does not mean airlines pay less tax
APD is a tax on any adult passengers departing the UK (as either part of an outward or return itinerary), that is collected by airlines as a ticket tax and passed through to HM Revenue & Customs. Therefore, the benefits of abolishing or significantly reducing APD are directly passed into the wider economy.
Key asks to Government from airlines
- To conduct a full review on the economic and environmental impacts of APD and a commitment to act on the findings.
- To remove the UK from the top of the international tax league by abolishing APD or reducing overall levels by 50% at the very least.
- Where the tax remains, to review the disparity between bands A and B and re-classification of Premium Economy to the same as Economy class (Discounted rate) rather than First and Business class levels (Standard rate).
The Position Statement and a history of APD rates can be viewed in the links below.