ANALYSIS Te test case for this may well be Scotland. While the Scots
voted against independence in the September referendum, one victory the devolutionists achieved was the right to make their own tax arrangements — which covers APD and any future replacement. As the Scottish National Party has committed itself to the reform and eventual abolition of APD, significant change looks likely. VisitScotland chairman Mike Cantlay describes the tax as “a
major deterrent to many potential visitors”. He adds: “Very few other EU countries levy APD, so this places Scottish tourism at a competitive disadvantage.” Naturally, Cantlay backs the devolved taxation powers. Under
European Union law, member states cannot differentiate taxes within their own borders, but because Scotland has a devolved government in Edinburgh, it will be able to set its own tariffs — or abolish APD altogether — without fear of any sanction from Brussels. Edinburgh airport claims an additional two million passen-
gers and ‘several’ airlines would use it if APD were abolished, although it’s worth noting that Scotland is performing well in any case, as a 16% year on year rise in arrivals to 1.1 million in the first half of 2014 shows. Powers giving Scotland the right to do as it pleases will not be
granted until after the General Election, but airports close to the border on the English side are already voicing concerns, fearing an exodus of passengers north. Tis claim has some credibility when it comes to Scotland’s flights to the US or the Middle East, which attract the higher APD rate, with Rapaport claiming that A Fair Tax on Flying research “indicates that people would con- sider changing airports”. However, when it comes to flights in the lower tax band, it
seems fanciful to suggest anyone would travel to a Scottish air- port from the likes of Newcastle or Manchester to avoid APD, as the cost would outweigh any saving. Moreover, charter flights generally tend to be more expensive in Scotland, as aircraft and crews are not usually based there and these extra costs are built into the fare.
THE REFUND PROCESS Another issue raised by the changes is the logistical problem of refunds. Many scheduled airlines won’t know the precise age of children already booked, as most just class them as being aged over two years and occupying a seat. Dale Keller, chief executive of the Board of Airline Represent-
atives in the UK, which speaks for 74 scheduled carriers, says: “Airlines that don’t have age details will have a PDF or some- thing similar that must be completed with the child’s age veri- fication.” He points out that refunds will also be made through tour operators or agents, as these will already have data. What’s more, the full balance is unlikely to have been paid on most packages bought for travel after 1 May, making the task easier. Airlines will complete the refunding process in the next few
months, having begun it in the weeks before Christmas. EasyJet, for example, claimed to have emailed “around 45,000 custom- ers” with existing bookings — those who have bought tickets for children aged between two and 12 on flights departing UK airports on or after 1 May. “It’s tricky, but we’ll get there,” says Keller. However, he also
makes the point that raising the age limit to 16 could prove com- plex as IATA uses the two-12 age group in GDSs. “None of the airline systems are geared up to this. We have until June, when May 2016 departures go on sale,” he says. Keller is watching the Scotland situation closely. “If Scotland
were to halve APD, that would be unacceptable. We don’t want it to become a London tax,” he insists.
countrybycountry.com February 2015 ABTA Magazine 31 His other campaign focus will be on the jump from £13 in
Band A to £71 in Band B for flights over 2,000 miles. “It shouldn’t be such a crazy differential. It’s unfair on countries that are on the cusp,” he adds. However, with the abolition of Bands C and D from 1 April, bringing the rest of the world into Band B, it might be a tough task to convince the Treasury of this argument. Te May election could prove pivotal. Labour has already
pledged to review APD and the Fair Tax campaign has vowed to fight on, targeting the rates being paid. According to Tory MP Henry Smith, in whose Crawley constituency Gatwick is situ- ated, only four countries — Senegal, Ivory Coast, Mali and Chad — charge more than the UK in APD. Tese countries can prob- ably justify their tax take given their lack of prosperity, while the UK, Smith believes, should review its stance. Meanwhile, A Fair Tax on Flying will be targeting MPs in the
run-up to the election. “Tere are no plans whatsoever to take our eye off the ball,” Rapaport confirms. For those who hold out hope of APD being abolished alto-
gether, there is unlikely to be any good news soon. According to the Aviation Environment Federation, the amount lost because no duty is levied on aviation fuel or VAT paid on air travel amounts to £10bn, while APD claws back only £3bn without the £50m that abolishing child APD will cost — a figure of which the Chancellor, or indeed any pretender to the job next May, will no doubt be all too aware.
APD CASE STUDIES
Ireland scrapped its Air Travel Tax (ATT) in April 2014 after five years. It had earlier fallen foul of EU laws because it had set two rates of tax — €10 for each passenger flying to an airport more than 300km from Dublin airport and €2 to any airport within 300km. This was considered by the EU to be interference within an internal market, so a flat €3 rate was introduced. The abolition of the tax was designed to stimulate more short-haul flights to Ireland and to encourage more UK travellers to transfer to North America services from Dublin or Shannon. Ryanair claimed the launch of 20 new routes from Ireland last summer was a direct result of ATT’s abolition.
Northern Ireland was given devolved powers to set its own long-haul APD in 2012. Belfast’s US routes had been haemorrhaging passengers to those from Dublin and airlines threatened to pull
out. The solution was to zero-rate any route of more than 2,000 miles from Northern Ireland.
Holland briefly introduced an air passenger tax from mid-2008 to the end of 2009. As Schiphol airport is dependent on transfer passengers, it was not levied on anyone changing flights, but instead purely on point- to-point services. When it was abolished, traffic from Eindhoven recovered by 25% and Maastricht by 30%.
Germany introduced a tax ranging from €7.50 to €42 on airline tickets in 2011 in an effort to cut emissions. The state of Rhineland-Palatinate mounted a legal challenge on the grounds it was causing passengers to avoid German airports in favour of those in neighbouring countries, but in November 2014 the Constitutional Court ruled the tax did not conflict with the rights of passengers and airlines.
IMAGE: ISTOCKPHOTO
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