Hopes of per plane APD reform fade
Although there will be an expected announcement of a reform of APD in the next Budget in March Travel Weekly understands this will not signal a move to it being calculated on a per plane basis.
Sources have said that government officials have decided per plane APD, that would benefit flights that emit less harmful greenhouse gases, is too complex compared to the current duty that is levied on a per passenger basis.
The news will disappoint many in the travel industry, including trade association Abta and the large charter and lowcost airlines that support a move to per plane APD. And it would signal a reversal of a coalition government agreement to work towards a new form of per plane APD, a pledge made in the Liberal Democrat election manifesto.
The likes of BA and the Board of Airline Representatives in the UK (BAR UK) would welcome the development as they never made any secret of their opposition to per plane APD that would be more costly to scheduled carriers due to their lower load factors and less efficient fleets.
However, Travel Weekly understands it was not lobbying from the large scheduled carriers that prompted the government's change of thinking on APD reform.
APD is the second least complex and therefore costly tax to collect behind VAT, which itself went up to 20% on January 1. It is understood government officials have decided a per plane APD is too complex.
The Treasury has long been thought to have stalled in looking at a per plane tax, despite a pledge to do so forming part of the coalition agreement between the Tories and Liberal Democrats.
The previous Labour government asked the Treasury to consider such a duty to replace APD, but then ruled it out because of the complexity. Chancellor George Osborne signalled a retreat from this position in his emergency Budget speech within weeks of the general election, when he pledged only to look again at APD.
Andy Cooper, Thomas Cook director of government and external affairs, said he was not able to comment on the government’s position, but said: “Our position is APD is as unfair as it ever was because you are penalising good performing airlines and there ought to be a more appropriate and equitable way of calculating it.
“Just as we are in favour of airlines being brought into the consumer protection regime we are in favour of APD moving to per plane basis and we will continue to push government for that.”
Cooper said it remained a matter of "pure speculation" that the government was planning other minor reforms of APD like the banding system that particularly disadvantages the Caribbean. “It’s unlikely we will see anything before the Budget. It’s a real wait and see,” he said.
Abta, Tui Travel, Thomas Cook, Monarch Group and the Caribbean Tourism Organisation are awaiting government proposals and have devised some key tests by which to evaluate them.
The problem with the per plane tax is that it would be more closely related to the emissions of aircraft. But a tax related to emissions looks very much like a tax on fuel, and any tax on fuel on international flights is banned under the Chicago Convention which regulates air traffic.
So a tax per plane would be certain to face legal challenges - indeed, US airlines have made clear they would challenge such a duty in the courts - and the Treasury is believed to have found no way round this.