Tax experts criticise lack of detail in Scottish Government’s plan for new Air Departure Tax (ADT)
The Chartered Institute of Taxation (CIOT) is calling for independent analysis into the impact of cutting and axing Air Passenger Duty (APD) in Scotland. The CIOT says there is not enough detail about plans to replace APD with Air Departure Tax (ADT) from April 2018 and says a special report could “strengthen” the rationale behind the change. APD earned Scotland £275 million in 2015-16 and the CIOT, a trade body representing tax professionals, says the Scottish Government’s Air Departure Tax Bill is short on information about proposed rates, bands and exemptions for the replacement. There are also no fiscal forecasts on how halving duty from next April or eventual abolition will be achieved. First Minister Nicola Sturgeon has said the change will benefit families and other holidaymakers who “may well welcome a reduction in the cost” of going abroad. They may therefore go abroad more often, spending money they would otherwise have spent in Scotland. Moira Kelly of CIOT said: “There is a case to be made for using this legislation to outline who will pay what, when they will pay it and who will be exempt …. In the absence of information such as this, it is very difficult to say with any degree of certainty what benefits, if any, this change will make.”
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Tax experts criticise lack of detail in Scottish Government’s plan for new Air Departure Tax (ADT)
Moira Kelly of CIOT has suggested that it is not clear what benefits replacing air passenger duty in Scotland will have
By Kirsteen Paterson (The National – Scotland)
14.2.2017
A “LACK of clarity” around Scottish Government plans to replace air passenger duty (APD) “risks parliamentary scrutiny”, tax experts claim.
The Chartered Institute of Taxation (CIOT) is calling for independent analysis into the impact of cutting and axing the charge to be published. It claims there is not enough detail about plans to replace APD with Air Departure Tax (ADT) from April next year and says a special report could “strengthen” the rationale behind the change.
APD earned Scotland £275 million in 2015-16 and the CIOT, a trade body representing tax professionals, says the Scottish Government’s Air Departure Tax Bill is short on information about proposed rates, bands and exemptions for the replacement. There are also no fiscal forecasts on how halving duty from next April or eventual abolition will be achieved.
First Minister Nicola Sturgeon has said the change will benefit families and other holidaymakers who “may well welcome a reduction in the cost” of going abroad. [And may therefore go abroad more often, spending money they would otherwise have spent in Scotland. AW note]
But Moira Kelly of CIOT said: “Of all of the tax powers being devolved to the Scottish Parliament, the proposed replacement of APD has been the one that has generated the most interest and debate, despite accounting for a relatively small share of the country’s overall tax receipts.
“There is a case to be made for using this legislation to outline who will pay what, when they will pay it and who will be exempt, as is the case in UK legislation. In the absence of information such as this, it is very difficult to say with any degree of certainty what benefits, if any, this change will make.”
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See earlier:
Scottish draft budget confirms intention to cut APD by 50% by the end of the Parliament
In the Draft Scottish Budget announced by Derek Mackay, he confirmed that the Scottish government now has the power to legislate for a tax which will replace Air Passenger Duty (APD) in Scotland. ” …we will introduce a Bill in the first year of the current Parliament to establish the tax which will replace APD in Scotland from 1 April 2018. We remain committed to delivering a 50% reduction in the overall tax burden of APD by the end of this Parliament.” He hopes this will “deliver sustainable growth for the Scottish economy by helping to generate new direct air routes, sustain existing routes and increase inbound tourism.” There is, naturally, no mention of the money lost to Scotland by more outbound tourism. The Scottish Government expects APD will raise £326 million in 2018-19 for them, and £342 million in 2019-20. Edinburgh Airport Watch commented that Mr Mackay did not mention how he will plug the resulting £150 million hole in Scotland’s public finances, or the generous tax incentives already enjoyed by aviation – no duty or VAT payable on aviation fuel, no VAT on purchases of aircraft, or on servicing of aircraft. Airports enjoy a huge tax break in the form of Duty Free Shopping – an enormous cash earner for Airport owners. APD is a fair and progressive tax on an exceptionally lightly taxed industry.
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Assessment of proposal to cut APD by 50% in Scotland shows likely overall fall in revenue
An assessment of the Scottish Government’s plans to cut the rate of Air Passenger Duty (APD) shows that the aviation industry’s analysis has not accounted for the impact of a fall in domestic tourism. The 50% cut in APD proposed would have the effect of damaging the Scottish economy and reducing funding for public services. The report “APD Cut: A Flighty Economic Case” challenges claims that reducing APD by 50% will lead to sufficient economic growth to cover the short-fall in revenue from the tax cut. In reality, cheaper tickets will encourage more Scots to take cheap foreign trips. The amount of money they take out of Scotland on these extra trips is likely to be larger than the amount brought in. The inbound tourists with greater spending power than typical domestic tourists are the least likely to be sensitive to airline ticket prices. In a buoyant economy, the increase in outbound trips is likely to exceed the increase in inbound trips. The case for business growth due to an APD cut appears particularly weak as business flights are driven by need and time pressures rather than price. They are know to be price insensitive. There could also be a reduction in domestic tourism by Scottish people, who instead take cheap foreign breaks, so reducing employment in Scottish tourism.
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Scottish Green Party calls for Sturgeon to abandon plans to halve APD
The Scottish Green party say that Nicola Sturgeon should abandon her plans to slash air passenger duty (APD). Patrick Harvie, co-convener of the Scottish Green Party, said it was clear that there is no longer a majority at Holyrood in favour of halving APD, which would add to pollution and do nothing to tackle social inequality. The SNP manifesto said it would reduce air passenger duty by 50% over the next parliament (to 2020 or 2021). However, no other party in Scotland supported the move, with even the Scottish Conservatives, traditionally in favour of tax cuts, saying it could not be justified “at a time of constrained fiscal conditions.” The Scottish Green party have suggested models of taxing aviation, such as the Frequent Flyer Levy, which would ensure the cost is shifted onto the minority of mostly wealthy individuals who fly most often. Cutting the rate of APD would have the effect of increasing CO2 emissions from Scottish aviation, by encouraging more flights. A better way to tax air travel (which pays no VAT, and on which there is no fuel duty) would be to recognise the environmental costs of flying. Communities that are badly affected by the noise from flight paths at Edinburgh and Glasgow airports would suffer more noise. The additional noise – especially at night – is known to have adverse health impacts, which have a cost to society.