Chancellor George Osborne announced in his Budget speech the reduction of Air Passenger Duty (APD) to some long-haul destinations from April 2015. He said: “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.”
The 2014 Budget document says this measure will “help British businesses strengthen links with high growth markets, and go further to make the UK an attractive option for business visitors and tourists" by abolishing the two highest rates – bands C and D – from 1 April 2015. This will eliminate the highest rates for travellers visiting destinations more than 4,000 miles from Britain, such as China, India, Brazil and "many other emerging markets" including the south Asia region.
A business class Band D flight (includes Australasia, Malaysia and Indonesia) attracts an APD levy of £194 from April 1 this year. This will drop to the Band B rate of £138 (plus any RPI-based rise) in April 2015.
Responding to the news, Institute of Travel and Meetings (ITM) CEO Simone Buckley told BBT: “This is good news for the industry as a whole, and particularly for our travel buyer members, who will welcome the potential reduction in the APD costs for long-haul travel, as well as the simpler and clearer method of calculation. This reform recognises the negative impact this heavy tax was having on companies that rely on their employees travelling around the world to do business.”
GTMC chief Paul Wait said the Guild had been lobbying for APD simplification in submissions to the Treasury and dealings with MPs, "...to remove the most damaging aspects of this tax and facilitate an expansion of trade with key growth markets. Without this reform, APD directly contradicts the rest of UK government policy by taxing new emerging markets the most.” He said he hoped this would be the first in a series of APD reforms to help the UK economy.
The Fair Tax on Flying campaign, which won the Outstanding Achievement accolade at this year's Business Travel Awards, added: “We welcome the government's reforms to APD, which will see a saving to passengers and businesses travelling long-haul of over £200 million annually. Today's decision is a positive first step. Hopefully these reforms will have a such a positive impact that they will encourage the government to undertake further reforms of APD in future.”
Daniel Barlow is a tax partner in the travel, hospitality and travel practice at financial services giant Deloitte. He said: “The Chancellor’s announcement that APD for long-haul [economy] flights will be cut from as high as £94 to £67 – the same banding as fights to the US – will be seen as a significant victory for campaigners.” He added: “Government’s commitment to retaining APD remains, probably for the simple reason that it raises around £3 billion of revenue per year, and only costs 0.06 pence to collect for every £1 raised."
Tzell UK director Barry Whittaker said there is more scope to further reduce or abolish the levy. “But today’s news is a positive step for UK business, airlines, airports and travellers," he said. "A vibrant air travel sector is crucial to the UK economy. It allows our businesses and travellers to connect with new markets, prospects and customers. The tax is a burden on our ability to compete on the international stage, given our competitors in the Middle and Far East are paying significantly less tax – or no tax at all."
Virgin Atlantic said the new two-band system was a "very welcome simplification" that removed unjust distortions, and the announcement showed that government has recognised the damage APD is having on exporters and travellers. A spokesman added: “A tax system which penalised high-growth emerging economies such as China and India was always contrary to the government’s stated policy on trade and exports."
Photo: London News Pictures/Rex