Under-taxed Aviation Industry wants to pay even less tax! It wants APD removed!
Date added: 11 March, 2012
A report due out tomorrow will claim that Air Passenger Duty (APD) is hurting the economy. But it fails to address the reason for the tax. The report from Oxford Economics, and commissioned by the World Travel & Tourism Council (WTTC), will claim that removing APD would result in an additional 91,000 British jobs being created and £4.2 billion added to the economy in 12 months. AirportWatch Chair John Stewart condemned the report “as a little more than a self-interested attempt by the aviation industry to pay its full share of taxation. It pays no tax on it fuel and is zero-rated for VAT”. The aviation industry is actually under taxed. Not over taxed. In 2010/2011 the exemption from fuel tax and VAT was worth more than £11 billion to the airlines. After deducting APD revenues of around £2.5 billion in 2012 after the rise this coming April, the net benefit is around £8.5 billion – equivalent to a subsidy to the airlines of about £360 per household. John Stewart said“The Government has rightly ignored the special pleading of the aviation industry to pay even less tax. There is no indication that this latest report from the industry’s favourite consultant will change the Government’s mind.”
AirportWatch, a coalition of national environmental organizations and airport campaign groups, has argued that a report due out tomorrow, which will claim that Air Passenger Duty (APD) is hurting the economy, fails to address the reason for the tax.
The report from Oxford Economics, and commissioned by the World Travel & Tourism Council (WTTC), will claim that removing APD would result in an additional 91,000 British jobs being created and £4.2 billion added to the economy in 12 months.
AirportWatch Chair John Stewart condemned the report “as a little more than a self-interested attempt by the aviation industry to pay its full share of taxation. It pays no tax on it fuel and is zero-rated for VAT”
AirportWatch has produced figures which show the extent to which the aviation industry is under-taxed. The exemption from fuel tax and VAT was worth more than £11 billion to the airlines. After deducting APD revenues of around £2.5 billion, the net benefit is around £8.5 billion – equivalent to a subsidy to the airlines of about £360 per household.
Stewart added: “The Government has rightly ignored the special pleading of the aviation industry to pay even less tax. There is no indication that this latest report from the industry’s favourite consultant will change the Government’s mind.”
ENDS
For further information: John Stewart 07957385650
Tourism Deficit
The report also conveniently ignores the amount of money taken out of the country by UK citizens travelling abroad for their holidays and spending their money abroad. Not in the UK. Details of the Tourism Deficit below
Loss of UK tourism jobs
It also conveniently ignores the number of jobs lost from the UK holiday and tourism destinations, because cheap flights take UK citizens out of the country, to holiday abroad. See below
Emissions Trading Scheme
Though aviation joined the European ETS in January 2012, it is not going to add significantly to air fares. For a European flight, it is probably under 50p. For a trans-Atlantic flight is it about £2 – £3. If airlines claim the size of ETS is putting off its customers, that is just plain incorrect. See below
Air Passenger Duty (APD) – how much the aviation industry is under-taxed
In 2010/11 the exemption from fuel tax and VAT was worth more than £11 billion to the airlines. After deducting APD revenues, the net benefit is around £9 billion – equivalent to a subsidy to the airlines of about £360 per household. The 53% of the UK population who do not fly – mainly the less affluent – find themselves subsidising the aviation industry. (Details)
The rates of APD change on 1st April 2012, when the rates rise by around 8% – in line with inflation, taking into account the fact there was no rise in 2011. The tax take is likely to be around £2.5 billion, rather than £2 billion per year after the rise. That means the net benefit to the industry of its exemption from VAT and fuel duty will be around £8.5 billion, after April 2012.
The Treasury has reiterated that APD is not an environmental tax. It was instituted in order to – in a small way – compensate for the aviation industry’s non-payment of fuel duty and VAT.
This is on Page 10 of Treasury document “Reform of Air Passenger Duty: December 2011- response to consultation”
“3.16 The Government has been clear that APD is primarily a revenue-raising duty which makes an important contribution to the public finances, whilst also giving rise to secondary environmental benefits. Furthermore, VAT is not applied to flights and aviation fuel for commercial flights is not taxed”.
The real facts about Air Passenger Duty:
APD distance bands APD £ per passenger from 1 April 2012
(old rates from 1.11.2010)
Miles from UK Reduced rate Standard rate *
in lowest class of travel in other than lowest
class of travel
Band A (0-2000) £13 (£12) £26 (£24)
Band B (2001-4000) £65 (£60) £130 (£120)
Band C (4001-6000) £81 (£75) £162 (£150)
Band D (over 6000) £92 (£85) £184 (£174)
* premium classes, business class, first class etc
AirportWatch says airlines must pay their fair share of the fuel tax burden
In a letter to the Chancellor in advance of the Pre Budget Report AirportWatch has pointed out that those who travel by air have it easy compared to those who travel by car. Motorists pay 58p a litre duty on their fuel. Motorists pay a further 22p VAT on their fuel. Motorists pay 20% VAT to have their car serviced. Airlines pay NONE of these. Motorists pay 20% VAT to buy their car. Airlines pay no tax on new aircraft. APD would need to be quadrupled to compensate for the fuel duty and VAT exemptions enjoyed by the aviation industry. In 2010/11 the exemption from fuel tax and VAT was worth more than £11 billion to the airlines.
17.11.2011 (AirportWatch press release)
AIRLINES MUST TAKE FAIR SHARE OF FUEL TAX BURDEN
In a letter to the Chancellor (see below) in advance of the Pre Budget Report AirportWatch has pointed out that those who travel by air have it easy compared to those who travel by car –
• Motorists pay 58p a litre duty on their fuel. Airlines pay nil. • Motorists pay a further 22p VAT on their fuel. Airlines pay nil. • Motorists pay 20% VAT to have their car serviced. Airlines pay nil. • Motorists pay 20% VAT to buy their car. Airlines pay no tax on new aircraft.
Air Passenger Duty (APD) would need to be quadrupled to compensate for the fuel duty and VAT exemptions enjoyed by the aviation industry.(2) And whilst motorists complain about swingeing year on year increases in the cost of filling up at the pump, the vast majority of airline passengers still pay APD at its lowest rate of £12, just £2 more than it was in 1997.(3)
Many motorists rely on their cars to travel to and from work or for their weekly shop but the vast majority of flights are for leisure purposes and, despite the advent of so-called ‘cheap flights’, air travel is increasingly becoming the preserve of an affluent minority. Fewer than half the UK population took any flights at all in 2010 and those who did had average household income in excess of £50,000. (4) .
Chairman of AirportWatch, John Stewart, commented: “We hear a lot of ritualistic grumbling from the aviation industry about levels of Air Passenger Duty but they conveniently forget to mention the £11 billion a year subsidy they enjoy from paying no fuel duty and no VAT. They also conveniently forget to mention their own surcharges. In these difficult economic times, the airlines must be made to take their fair share of the fuel tax burden.”
ENDS NOTES FOR EDITORS
1. A copy of the AirportWatch letter to the Chancellor is below.
2. In 2010/11 the exemption from fuel tax and VAT was worth more than £11 billion to the airlines. After deducting APD revenues, the net benefit is around £9 billion – equivalent to a subsidy to the airlines of about £360 per household. Even the 53% of the UK population who do not fly – mainly the less affluent – find themselves subsidising the aviation industry.
3. APD for economy short haul flights applied at a rate of £10 per passenger from 1997 until 2001 when it was halved to £5.00. The £10 rate was restored in 2007, increased to £11 in 2009 and to £12 in 2010. In 2010/11, 77% of all passengers paid the lowest (£12) rate.
Rt Hon George Osborne MP Chancellor of the Exchequer HM Treasury 1 Horse Guards Road London SW1A 2HQ
Dear Chancellor
AirportWatch is an umbrella organisation uniting the national environmental organisations, airport community groups and individuals opposed to unsustainable aviation expansion and its damaging environmental effects, including climate change.
We are aware of the lobbying pressure being applied to you by the aviation industry to reduce Air Passenger Duty (‘APD’) and we herewith set out some of the counter arguments.
We note that you are also being pressed by the road transport lobby for tax concessions and, whilst it is not part of our remit to argue the case for road users, it is irrefutable that those who travel by air are lightly taxed compared to those who travel by car –
• Motorists pay 58p a litre duty on their fuel. Airlines pay nil. • Motorists pay a further 22p VAT on their fuel. Airlines pay nil. • Motorists pay 20% VAT to have their car serviced. Airlines pay nil. • Motorists pay 20% VAT to buy their car. Airlines pay no tax on new aircraft.
APD would need to be quadrupled to compensate for the fuel duty and VAT exemptions enjoyed by the aviation industry. And whilst motorists complain about swingeing year on year increases in the cost of filling up at the pump, the vast majority of airline passengers still pay APD at its lowest rate of £12, just £2 more than it was in 1997.
Many motorists, particularly in rural areas, rely on their cars to travel to and from work or for their weekly shop but the vast majority of airline flights are for leisure purposes, increasingly the preserve of an affluent minority despite the advent of so-called ‘cheap flights’. Fewer than half the UK population took any flights at all in 2010 and those who did had average household income in excess of £50,000. In short we believe that the aviation industry has very little to complain about, especially in these difficult economic times.
We would also ask you to examine the economic evidence relating to the price of air travel and the balance between inward and outward tourism. This evidence clearly indicates that increasing the price of air travel has a significant dampening effect on outward tourism but very little effect on inward tourism to the UK, thus making a positive contribution to jobs, economic growth and the UK trade balance.
In conclusion, we are confident that any proper review of the evidence will clearly indicate that there is a compelling case for a substantial increase in APD on the grounds of fiscal equity and fairness. Increasing APD would also contribute towards the deficit reduction plan and to UK employment, investment and economic growth.
Yours sincerely
John Stewart Chairman
Tourism Deficit
There is a “tourism deficit” to the UK economy – estimated at around £ 14 – 19 billion per year. Below are the most recent Tourism Deficit figures from the ONS. See Briefings for details
The ONS said (July 20011) “Visits abroad have fallen quite substantially in recent years, particularly for holiday and business purposes. This has resulted in a reduction of the deficit associated with travel, from a peak of over £20 billion in 2008 to £14.2 billion in 2010.”
All UK regions except London run a substantial economic deficit as a result of aviation-based tourism.
Loss of UK tourism jobs
“The Expansion of Regional Airports – Really a good thing?” (September 2009, AirportWatch) showed that the tourism deficit loses local economies billions due to the export of UK citizens to holiday abroad.
END UNFAIR SUBSIDY OF CHEAP AIR TRAVEL TO REGENERATE BRITISH SEASIDE RESORTS, TRAVELODGE TELLS INQUIRY
29th Jan 2008
Travelodge, the UK’s fastest growing budget hotel chain, told a House of Commons Select Committee inquiry into tourism today that unfair tax breaks for short haul airlines* are slowly bringing the curtain down on regional tourism including Britain’s seaside resorts.
Travelodge Director of Communications Greg Dawson claimed budget airlines “are the single biggest cause of decline in traditional tourism resorts and we urge the Inquiry and Government to investigate the airlines’ unfair grip on holidaymakers that is squeezing the life out of British tourism.”
Research provided to the Inquiry reveals:
– Inward tourism spend declined 16% between 1995 and 2002; outward spend increased 48% creating a tourism balance of trade deficit of £18bn
– The North East region has a tourism deficit of £2.5bn South West £1.5bn, Midlands £4bn and North West tourism economy exports £2.5bn more in spending overseas that it attracts**
– All are forecast to double by 2020 creating a national deficit of 58 Million visits and £25 Billion spending
He continued: “VAT exemption on flights immediately puts domestic tourism on the back foot. It is an inbuilt cost incentive to holiday abroad rather than stay at British resorts and attractions. We call on the Government to create a fair playing field for British tourism by adding VAT to air travel.
“What are the budget airlines doing to attract more international visitors into the UK? Tourism and the airlines must work together from now on. A 10% reduction in overseas flights by British tourists by 2020 would create 31, 250 jobs and inject £1Billion*** into struggling tourism locations outside of London. Our Prime Minister’s love of Britishness must now embrace the challenge of saving seaside tourism.”
Travelodge CEO Grant Hearn told the Inquiry: “Labour has thrown away of decade of growth potential for the tourism industry.
“7 Tourism Ministers, a 10 year funding freeze, a 9% drop in world market share and the slowest growth rate of growth of our European competitors is a sad story of mismanagement and failed policy. Winning the 2012 Olympics was a highlight but the Government is still dithering over whether to release the funds needed to secure the much hyped tourism legacy.
“Today we called on the Government to embrace tourism as a national economic priority, address the complete lack of a coherent business plan for British tourism growth and suggest that the Prime Minister follows the example of successful European tourism economies by moving tourism from a
culture to an industry focused department. We are ready to engage in anyway the Prime Minister wants.”
Travelodge CEO Grant Hearn forecast that regional and seaside tourism could be rebuilt through a combination of private sector investment, Government incentives to attract new attractions and better marketing.
Following a 7% year on year rise in visitor numbers to its seaside properties, Travelodge will today announced it will invest £50 Million doubling its number of seaside hotels to 20 by 2010.
New hotels in Worthing, Great Yarmouth, Brighton, Bournemouth, Scarborough, Eastbourne and Blackpool (2) will spearhead the Company’s campaign to help regenerate seaside resorts.
Budget airlines are “squeezing the life out of British tourism” and the government is exacerbating the problem by promoting expansion of the aviation industry, MPs were told yesterday.
Budget hotel chain Travelodge accused Ryanair and easyJet of driving an £18bn “tourism deficit” by drawing British holidaymakers away from Britain with low fares underpinned by state tax breaks.
In a hearing at the House of Commons select committee into tourism, Travelodge said inward tourism spending had declined by 16% between 1995 and 2002 while spending by British tourists abroad had climbed by nearly 50%. Greg Dawson, Travelodge director of communications, said no-frills carriers were “the single biggest cause of decline in traditional tourism resorts and we urge the inquiry and government to investigate the airline’s unfair grip on holidaymakers that is squeezing the life out of British tourism”.
Travelodge said airlines received an unfair advantage from the government because they do not pay VAT on international ticket sales. It estimated that a 10% reduction in overseas flights by British holidaymakers over the next 10 years would create 31,250 jobs and generate £1bn for regional tourism. The firm is attempting to break into the British tourism market by opening 20 seaside hotels by 2010.
EasyJet said the Travelodge complaint was “bizarre”. Toby Nicol, easyJet’s communications director, said bed and breakfast owners would probably make similar accusations against Travelodge.
Emissions Trading Scheme
See Connie Hedegaard responsein which she says “Depending on the airlines’ decisions, costs can range between €2 and €12 a ticket each way on a transatlantic or other long-haul flight at current carbon prices.” And “The estimated CO2 emissions per passenger of a one-way flight from Paris to Beijing would be around 627 kg. The value of the allowances that need to be surrendered would be €7.52 per passenger at current carbon prices. Given the high level of free allocation of allowances to airlines, it is estimated that the cost for the airline in purchasing additional allowances to cover the emissions would be €1.50.”
In an interview on Radio 4 Today programme on 3.1.2012 a spokesperson from easyJet said fares were likely to rise by an “insignificant” amount, of 30 – 50p per ticket due to the inclusion of aviation into the EU ETS.
“Assuming airlines fully pass on any extra costs to customers, by 2020 the price of a typical return flight within the EU could rise by between €1.8 and €9. Long-haul trips could increase by somewhat more depending on the exact journey length, due to their higher environmental impact. Nevertheless, ticket price increases are in any case expected to be significantly lower than the extra costs passed on to consumers due to world oil price increases in recent years.” http://europa.eu/rapid/pressReleasesAction.do?reference=IP/06/1862
