Per plane tax will make UK business less competitive
Friday 14 May 2010
The UK will become a less competitive place to do business if the coalition government commits to a ‘per plane’ aviation tax. The Freight Transport Association (FTA) believes there are better ways of tackling emissions from aviation, which do not leave UK businesses at a competitive disadvantage.
Christopher Snelling, FTA’s Head of Global Supply Chain Policy, said:
“Superficially this is an attractive policy, but when you look at the detail it doesn’t work. Taxing by plane will not generate extra revenue or reduce emissions. Air services, especially freight-only ones, will simply relocate to continental European hub airports and goods will then be trucked across to the UK. The resulting loss of business will wipe out any gain to the Exchequer from the increased tax levels. And the goods will still be flying – but just with a longer road leg on the end.
“The net result for UK business will be increased costs, reduced service and greater unreliability – exactly the opposite of what internationally competing UK businesses, such as pharmaceuticals or technology, need.”
Although detailed transport policies have yet to be revealed, Transport Secretary Philip Hammond has vowed to scrap per passenger duty in favour of taxing by plane not the passenger, in order to ‘drive greener behaviour’.
Snelling concluded:
“We all accept that funds will need to be raised by the new Government. The current Aviation Passenger Duty is simple to administer and only affects those sectors of the passenger and freight markets less likely to transfer elsewhere. If the Government needs to raise more money from aviation it should look at the levels of APD, not introducing a new tax that will hurt British business at this delicate time.
“It is important that any efforts to reduce the environmental impact of aviation are made at a global, or at least a European level – the aviation industry is a global one and any change at the national level will have no impact on the way business operates, other than pushing people away from the UK. We intend to represent the business implications of a per plane tax to the new ministerial teams at the Department for Transport and the Treasury most strongly.”
The incorporation of aviation into the EU's Emissions Trading Scheme was agreed in 2008 and FTA argues that this is the mechanism to use to deal with the undeniable environmental impacts of air services.
Notes for editors
The Treasury previously examined this policy in 2007/8, concluded against introducing this change and instead reformed and increased ADP. The reasons for not introducing a per plane duty, which had been the original intention, included: “the need in the present economic circumstances to mitigate the potential impact on the air-freight sector, the impact on employment in this sector, and the wider business community which relies on air-freight services;”
Source: Treasury publication ‘Aviation duty: response to consultation’, November 2008 - http://www.hm-treasury.gov.uk/d/pbr08_aviationduty_395.pdf
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