Treasury consulting on a Frequent Flyer Levy to tax aviation (Treasury not keen on it)
The Treasury has a consultation (ending 15th June) on several aspects of the taxation of aviation. The first section was on domestic APD (Air Passenger Duty); the second part is on changes to the international APD bands and also on a Frequent Flyer Levy (FFL). The Treasury document says: “The Committee on Climate Change and several environmental stakeholders have suggested that the government should introduce a frequent flyer levy, in order to tackle the environmental impacts of flying in an equitable way. … A frequent flyer levy would seek to constrain overall demand for flights, by increasing the amount of tax liability due, according to the number of flights a passenger had previously taken. Unlike APD, the tax would be levied on the individual, rather than the airline.” It stresses the various difficulties in administering the tax (a great deal of data to be collected, people with multiple passports, people who need to fly often…) It makes out that people who fly a lot already pay more APD, ignoring the key point of the FFL that the tax ramps up for each flight, so the 5th or 10th flight in one year costs a great deal more, than the standard APD rate on each. It concludes: “The government is therefore minded to retain APD as the principal tax on the aviation sector and not introduce a frequent flyer levy as a replacement, and welcomes views on this position.”
Aviation Tax Reform consultation
Frequent flyer levy
4.14 The Committee on Climate Change and several environmental stakeholders have suggested that the government should introduce a frequent flyer levy, in order to tackle the environmental impacts of flying in an equitable way.
4.15 A frequent flyer levy would seek to constrain overall demand for flights, by increasing the amount of tax liability due, according to the number of flights a passenger had previously taken. Unlike APD, the tax would be levied on the individual, rather than the airline.
4.16 A frequent flyer levy would be significantly more complex to administer than APD, for both airlines and HMRC, on the basis that it could require the government to collect and store personal information on each passenger. The government would have to be able to record and identify every flight an individual took from a UK airport for the purposes of calculating how many flights they had taken within a given period. This would not only increase complexity (because of the significant increase in taxpayers) but may also pose concerns around data processing, handling and privacy. There may be additional compliance issues, particularly with passengers who were able to travel under multiple passports. It may also pose challenges for individuals who have an essential need to fly frequently.
4.17 In addition, it is important to note that airlines ordinarily pass the cost of APD onto the passenger. Therefore, those passengers who fly more will, in effect, already pay more under the current system.
4.18 The government is therefore minded to retain APD as the principal tax on the aviation sector and not introduce a frequent flyer levy as a replacement, and welcomes views on this position.
The question on this is:
Frequent flyer levy :
25. Do you agree with the government’s assessment that APD should remain as the principal tax on the aviation sector? Would you propose any alternative tax measures which could further align the aviation tax framework with the government’s environmental objectives?
This is taken from
Treasury consulting on APD distance bands change; perhaps to 3 or 4 (just 2 now)
The Treasury has a current consultation on “Aviation Tax Reform.” Part of it is whether the level of Air Passenger Duty (APD) on domestic flights should be changed. Currently a passenger on a return domestic flight pays £13 x2 = £26, as they leave a UK airport twice. The cost is only £13 for a return flight to a European (under 2,000 miles) destination. They are also consulting about whether there should be more bands for APD for longer journeys. The government is aware that air travellers should pay more, if they fly further and thus cause the emission of more carbon. In 2008 it was decided there would be 4 distance bands with increasing APD costs; under 2,000 miles; 2,000 – 4,000; 4,000 to 6,000; and over 6,000. But in 2014 this was changed to just two bands, under and over 2,000 miles. The consultation asks if the bands should be changed; if they should revert to the 4 levels there were between 2008 and 2014; or if there should be a new system, with three bands. These would be under 2,000 miles; between 2,000 and 5,500 miles; and over 5,500 miles. There were some potential technical difficulties with very large countries – eg. the US or Russia – so only considering the capital city, to categorise the country, can be unfair. Consultation closes 15th June 2021.
Why we need a Frequent Flyer Levy
JANUARY 24, 2020
Most people don’t fly very much, and business travel is falling. What if we didn’t need that new runway after all?
2019 was the year ‘Flight shame’ hit the headlines, and we all became much more conscious of the damage our air travel is doing to the climate. While it’s essential we all do our bit to reduce flying, some people are doing a lot more damage than others. That’s where this new idea comes in.
A group called Fellow Travellers http://afreeride.org/ have looked at the details of how Brits fly, and come up with a way to reduce the total number of flights without ruining everyone’s holidays. Let’s take a look.
Most people don’t actually fly that much
At the heart of it is a little-known fact: most people hardly fly at all.
Even though Brits fly more on average than any other country, more than half of us (57%) took no flights at all last year. 22% took one return flight, and 11% took two.
That doesn’t add up to much, but what about business trips? Nope. Business travel is actually declining, and now accounts for just 12% of all flights.
So who’s doing all the flying?
In short, it’s a tiny number of people with lots and lots of money. According to the Fellow Travellers, 15% of the population take 70% of all flights. People in that 15% group earn more than £115,000 a year. They tend to have a second home abroad. And their most popular destinations? Tax havens.
So, we’ve got a tiny minority crowding the skies with trips to their holiday homes abroad. Let’s imagine for a moment that we didn’t think that was the best way to spend our national carbon budget. How do we fix this without pricing ordinary people out of the skies?
A fairer way to fly
Fellow Travellers’ solution is pretty simple: scrap the current flight tax (Air Passenger Duty) and replace it with a Frequent Flyer Levy http://afreeride.org/ that taxes people based on how much they fly.
Why are these both taxed the same? 14th trip to tuscan villa and young backpacker on adventure of a lifetime.
With this system, everyone gets one tax free return flight each year. Tax kicks in at a low rate from the second return flight, then goes up a notch for each extra one taken in that year. So the frequent flyer’s monthly trip to their Tuscan villa gets much more expensive, and everyone else’s occasional week in the sunshine gets a bit cheaper.
Because all the demand is coming from ultra-frequent leisure flyers, taxing this end of the market would make a huge dent in overall flight numbers. So much, in fact, that we wouldn’t need to expand Gatwick or Heathrow.
So next time someone tells you we’ve got to concrete-over the South East with new runways, it’s worth remembering that there is another route.
Statistics via http://afreeride.com, DfT statistical release, July 2014, Public experiences and attitudes towards air travel, and DfT’s National Travel survey 2013.
See more at http://afreeride.org/
Behaviour change, public engagement and Net Zero
A report for the Committee on Climate Change
This report by Imperial College says:
“However, a frequent flyer levy based on number of flights could fall more heavily on travellers who take several short-haul flights than those talking fewer but much more damaging long-haul flights: a flight from London to Melbourne Australia has approximately 15 times the impact of a London-toBarcelona flight. An alternative replacement for the Air Passenger Duty which should be considered and explored is an Air Miles Levy which escalates with air miles travelled rather than simply the number of flights taken. It should also factor in the much larger emissions for First Class tickets which can have 7 times the emissions of an economy ticket (Murray et al., 2019) due to more spacious cabins and more unfilled seats. By factoring-in distance, the levy would be more closely linked to emissions and fall more heavily on those polluting more. It would also more effectively discourage long-haul flights: as most flying is for leisure, some shift from long-haul to short-haul destinations would be expected, delivering further emissions reductions. Averaging-out flying habits
over a longer period than one year would also be fairer: a three or four-year period, for example, could mean a traveller could take a long-haul trip without incurring a substantial levy if they took few other flights during the rest of the period. Travel for work should be kept separate from personal allowances and the 3-year cycle should be based on travellers’ dates of birth, rather than calendar year or tax year, to prevent distorting demand at the beginning and end of these periods.”
P 34 of
• Introduce an Air Miles Levy which escalates as a function of air miles travelled by the individual traveller and factors-in larger emissions for First Class tickets. This would provide strong price signals against excessive flying by 15% of the UK population responsible for 70% of flights without raising prices for other travellers as an aviation fuel tax would. It would also encourage shifting from long-haul to short-haul leisure destinations while using 3 or 4- year accounting periods would allow travellers greater flexibility for an occasional long-haul flight without incurring the levy.
• Introduce a ban on air miles and frequent flyer loyalty schemes that incentivise excessive flying (as was enforced in Norway 2002-13).
• Encourage more responsible flying by mandating that all marketing of flights show emissions information expressed in terms that are meaningful to consumers (e.g., as proportion of an average household’s annual emissions now and under Net Zero).
P 35 of
What can firms do?
Finance officers have been delighted to find that executives could do much of their work on Zoom during lockdown, thereby saving a small fortune on business-class seats. This trend looks likely to continue to an extent.
As business-class flying contracts, aviation could shrink overall because the profit from business seats subsidises the cost of economy-class seats.
Tackling frequent-flier programmes (FFPs) would also be effective. At the moment executives clock up air miles every time they fly. They then swap these for leisure flights with their families. So, basically, the more they fly, the more they’re incentivised to fly.
In Germany, air miles are taxed as a benefit in kind. However, environmental campaign group Greenpeace says they are so harmful they should be banned altogether.