As anyone who has recently flown from a UK airport will know, the British Government levies a tax on all outbound flights. What is less well known is that this tax – Air Passenger Duty (APD) – is the highest tax of its kind anywhere in the world, costing up to nearly £200 per person on some long-haul journeys. Inevitably, it’s having a direct impact on the British economy, affecting UK businesses’ ability to conduct commerce overseas, and acting as a barrier to inbound tourism.
APD was first introduced in 1994 at a rate of just £5 for European flights and £10 for all other destinations. But, spotting a potential boon for the Treasury, successive Chancellors have – inevitably perhaps – increased APD. At first it was under the guise of environmental responsibility, and latterly (as Chancellor George Osborne admittedly recently) as a pure revenue-raiser. But the fact is that whatever the motivations of different Governments it has increased beyond that which any of us could have imagined.
What’s more – and this might seem counter-intuitive – reducing or abolishing APD would actually be good for the economy. Why? Because there is now, for the first time, overwhelming evidence demonstrating the clear economic benefits of reforming APD. A major new study by the consultancy PwC (‘The economic impact of Air Passenger Duty’), used what is known as a “dynamic” approach to modelling the tax impacts of APD – a method also used by the IMF, the World Bank and some national governments. Applied for the first time to APD, it finds that there are significant benefits of both reducing and abolishing APD, specifically, that abolishing APD could boost UK GDP by 0.46%. Additionally – and this is the key – abolition would boost GDP by £16 billion in the first three years, resulting in the creation of almost 60,000 extra jobs and increasing overall tax receipts to the Treasury. In other words it is one of the only taxes that, if abolished, would actually raise Exchequer revenues from the increase in other indirect taxes! Win, win!
The costs now associated with APD are staggering. A recent TaxPayers’ Alliance report found that a typical family of four flying to Florida would pay £260 in APD alone, with costs set to rise yet further next April. That is why this week we are delighted to welcome Sabre to the campaign to reform APD as members of A Fair Tax on Flying, helping to make a powerful and persuasive case to the British Government to take decisive steps to make the tax fairer.
In terms of UK businesses, we know that many of our members and supporters are impacted by APD and that is why we are pleased that our first global tech company is now lending their backing to this cause. We hope this will result in a step-change in the campaign – demonstrating to Government the seriousness with which all of us across all industries take this issue.