There’s nothing unfair about Air Passenger Duty
It’s become a summer fixture. As regular as Wimbledon, Henley or cricket as Lords. It is the call by the aviation industry to end what it terms ‘the tax on people’s holidays’: the start of its annual Fair Tax on Flying campaign. The industry of course is talking about Air Passenger Duty (APD). What is doesn’t talk about are the considerable tax breaks it enjoys through tax-free fuel and exemption from VAT. Nor does it mention that APD would need to rise four-fold to pay for the money the Exchequer loses each year as a result of these tax-breaks (outlined in more detail on this AirportWatch page: www.fairtaxonflying.org.uk).
The purpose of this blog is not to kill off holidays in the sun but to unravel the industry spin around APD. Let’s start with the tax-breaks. Motorists pay 58p a litre in fuel duty + VAT at 20%. Thus petrol tax is at a rate of approx 160%. Tax on aviation fuel is 0%. http://en.wikipedia.org/wiki/Fuel_tax. The Treasury estimated in October 2009 that, if aviation paid VAT and its fuel was taxed at the same rate as petrol for cars, the UK would earn at least £10 billion a year. With the increase in fuel tax and VAT since then, the figure is now between £10 – 11 billion.
Let’s pause for a minute to let this figure sink in. The country is losing over £10 billion a year because of the tax-breaks the aviation industry enjoys. This at a time when cut-backs are being made to social services, schools, libraries, old people’s homes………Where’s the “fairness” in that? Even Bob Diamond, the disgraced head of Barclay’s Bank, would struggle
with this definition of fairness. This is Orwellian language. It’s Animal Farm relocated to Heathrow Airport.
The much-derided APD only brought in around £2.6 billion in 2011/2012, expected to reach £2.8 billion in 2012/2013: http://www.telegraph.co.uk/travel/travelnews/air-passenger-duty/8923504/Autumn-Statement-2011-Air-Passenger-Duty-rise-confirmed.html. The difference between the lost revenue to the Treasury – £10-11 billion per year -and the tax take from APD – £2.8 billion – is £8-9 billion, the figure by which aviation is effectively subsidised each year.
Of course the industry correctly argues that it contributes billions to the economy each year. But for it to claim, as the Manchester MP Graham Stringer did recently, that Air Passenger Duty puts UK in a “ridiculous anti-competitive position” http://tinyurl.com/bm3cfr4 is once again play fast and loose with the facts. Although it is true that other countries do not impose APD (through some impose VAT and tax fuel for domestic flights) there is no hard evidence to back the sort of claims Stringer is making.
Stringer, of course, has form. Not for nothing is he known amongst his fellow MPs as ‘the honorable member for Manchester Airport.’ For a number of years he was chairman of the Manchester Airport Group. Go though the pages of Hansard and, as regular as the first flight from Heathrow, you’ll find Stringer attending each debate on aviation making the industry case.
The fact of the matter is that the rate of APD for most passengers flying on holiday is only £13 for a return flight. Only once you travel beyond Europe do the rates rise. It is only fair that we as passengers should pay this tax. As aviation minister Theresa Villiers has said on several occasions: if APD is abolished, the Government would need to raise the tax from elsewhere.
The good news is the Government is not falling for the industry spin about a tax on people’s holidays. Every summer the industry mounts its campaign. Every autumn the Chancellor announces another rise in APD. That’s as it should be until the tax-breaks the industry enjoys are no longer. It is only fair.