The U.K. government today rejected proposals to change the way its controversial air passenger duty (APD) is calculated.
An anomaly in the four band system means that passengers flying from London to the Caribbean will continue to pay more tax than those travelling to U.S. West Coast destinations and Hawaii. Premium economy fares will also continue to be taxed at the same rate as business or first class.
In today’s response to a consultation launched earlier this year, the Treasury said that “no banding structure will be entirely free of anomalies.” In explaining its decision to keep four bands, the Treasury said: “A move to a two-band structure would require passengers travelling within the U.K. and Europe and those travelling to band B destinations, including the United States, to pay more in order to ensure overall revenue neutrality.”
The decision has provoked another angry response from the industry. The British Air Transport Association’s chief executive, Simon Buck, said that the government “claims to support tourism and inward investment but is in effect damaging both through a bizarre combination of high taxation and bureaucracy.”
(BA) announced that it will halve its recruitment drive and keep two grounded next summer, as well as reviewing the use of two others. BA had planned to create approximately 800 new jobs in 2012 but, it says “against an already difficult economic background, these fresh tax hikes make it impossible for us to proceed with this level of recruitment, so we expect to reduce this number by about half.” Keith Williams, the airline’s chief executive, said that the government’s tax policy is “uniquely hostile to aviation.”
The anti-APD coalition, which includes the chief executives of, International Airlines Group, and , also issued a statement dismissing the consultation as “a sham and a waste of taxpayer’s money.” Calling for the tax to be scrapped altogether, they added: “We are united in calling for the government to commission an independent study of APD’s overall economic value and impact.”
Conversely,, the U.K.’s largest domestic airline, welcomed the government’s decision to keep four bands in place. Chief Executive Jim French said: “There were many that sought to persuade the government that domestic passengers should, in effect, subsidize long-haul passengers by paying more tax. I applaud the Chancellor for disregarding such calls and for supporting a domestic market that has seen 20% less passengers since 2007.”
Last week, the government announced in its budget statement that it will continue with an above inflation increase in the amount levied to passengers from April 2012, with the tax extending to business aviation in April 2013.