UK: Budget 2014: air tax reform provides boost for holidaymakers
20 March 2014
Posted by: Author: Oliver Smith
Author: Oliver Smith
Long-haul travellers have been given an unexpected boost after George Osborne announced a surprise air tax reform in his Budget Statement
The Chancellor said he wanted to reform Air Passenger Duty (APD) and "end the crazy system where you pay less tax travelling to Hawaii than you do travelling to China or India."
Abta, the Association of British Travel Agents, said the move will save air passengers more than £200 million annually.
From April 1, 2015, the tax on long-haul flights between 4,001 and 6,000 miles will be reduced by £14 per person, while those over 6,000 miles will be cut by £26. The move will save a family of four £56 when visiting destinations such as the Caribbean, India or Thailand, or £104 when visiting Australia, Argentina or Singapore (see table below). Those flying in premium economy, business class or first class will save twice as much.
Mr Osborne said the tax "hits exports, puts off tourists and creates a great sense of injustice among our Caribbean and South Asian communities here in Britain."
APD is currently calculated by measuring the distance between London and the final destination’s capital city, with different contributions divided into four "bands”. Band A covers flights of less than 2,000 miles, B covers those between 2,001 and 4,000 miles, C applies to those between 4,001 and 6,000, and D to those farther than 6,000 miles.
"From next year, all long-haul flights will carry the same, lower, band B tax rate that you now pay to fly to the United States," Mr Osborne said.
The Budget document added: "To help British businesses strengthen links with high growth markets, and to go further to make the UK an attractive option for business visitors and tourists, Budget 2014 announces that the Government will reform Air Passenger Duty (APD) by abolishing bands C and D from April 1, 2015."
Planned increases to APD in line with inflation, scheduled for next month, will go ahead.
The changes were quickly welcomed by airlines and tour operators. The Caribbean Tourism Organisation (CTO) said it was delighted with the announcement. "This is a complete victory for the Caribbean which, led by the CTO, has been lobbying against the unfair system," said Beverly Nicholson-Doty, CTO chairman.
"The Government has finally acknowledged what the industry and business knew all along," said Dale Keller, chief executive of the Board of Airline Representatives in the UK, "that the highest rates of aviation tax in the world were a brake on driving the UK’s economic growth with emerging markets."
A Fair Tax on Flying, a campaign group which represents dozens of travel firms, said the changes were recognition that "for far too long, travellers have been suffering as a result of the excessive levels of APD," but also urged the Government to consider further reforms.
Abta welcomed the move and described it as "a first step" in the reform of a "damaging tax". "Moving all long-haul flights into band B of APD at current levels will save passengers over £200m annually," a spokesman said, "and should boost travel and tourism, as well as promote greater UK connectivity."
It will continue to call for a reduction in overall rates of APD, however, which it said inhibits the contribution of the tourism sector to growth and employment.
Chris Clarkson, managing director of sunshine.co.uk, offered more muted praise. "Of course the reform in APD this year wasn’t anything dramatic," he said. "Was anyone really expecting it to be? The reductions planned for long-haul flights won’t benefit those holidaymakers looking to take trips closer to home, but at least it’s a start.”
Telegraph Travel has been campaigning against APD since 2008. It has already risen by up to 470 per cent since 2007, making British fliers among the most heavily taxed in the world. In a study published last year by the World Economic Forum, the UK was ranked 138th out of 139 countries according to the competitiveness of its air taxes and airport charges – ahead of only Chad in Africa. Only six countries in Europe currently levy a departure tax, and from April 1, Ireland will scrap its own equivalent of APD.
This article first appeared on telegraph.co.uk.