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Airlines revealed as country’s biggest tax dodgers

19 October 2009
Environmental groups are today naming the airlines as the country’s biggest tax dodgers and showing up the falsity of claims by the aviation industry that air passenger duty (APD) is hurting their business.  

New Treasury figures obtained by the groups show that airlines dodge £10 billion in tax each year by not having to pay fuel tax or Vat [1]. They pay just £2 billion in APD [2]. The groups say the Chancellor must stand firm on the recent and proposed increases in APD [3].
Stephen Joseph, executive director of the Campaign for Better Transport, said: “The Chancellor shouldn’t be fooled by the airlines’ whingeing about air passenger duty. The duty is a sensible tax that does not harm their businesses. The Chancellor should stand firm on APD increases and also look to tax fuel on domestic flights.”
John Stewart, chairman of AirportWatch, commented: “The tax subsidy for air travel means that Government calculations of the economic benefit of new runways at Heathrow and Stansted are unreliable: take away the subsidy and the new runways would all make a loss.”
Tim Johnson, director of AEF, added: “Perpetuating a £10 billion tax benefit for aviation is a ludicrous situation, encouraging aviation emissions to keep growing at a time when we need deep cuts in our greenhouse gas emissions. It will put pressure on the carbon allowances of every other sector, pushing up bills for essential services such as electricity and heating in order to keep air travel artificially cheap."
In the long run, the environmental groups say, there needs to be worldwide agreement that aviation should pay its full share of public revenues. As Stewart commented: “That would be a good, simple decision to come out of Copenhagen.”
Notes for editors
[1] The Treasury has shown Campaign for Better Transport, AirportWatch and AEF new figures showing that the notional benefit that airlines receive by paying no fuel tax and no VAT is up to £10 billion a year. For confirmation contact the Treasury press office. Treasury officials emphasise that this calculation does not assess how much the demand for air travel might fall if tax were increased to the same level as on cars, and emphasise also that giving the figure does not imply any policy decision to rectify the situation.
[2] APD is expected to raise £1.8 billion in 2009-10, according to the 2009 Budget statement. It is forecast to raise £2.2 billion in 2010-11, rising to £3.3 billion in 2013-14 (pdf). The £10 billion notional benefit figure is also likely to rise, as a result of increased fuel duty and rising economic activity.
[3] There has been an intense lobbying campaign by the airlines during recent months (see quotes from Ryanair below) to persuade the Chancellor to relent on the proposed APD increases when he puts out his pre-budget statement in late November or early December. Campaign for Better Transport, AirportWatch and AEF have written to the Chancellor urging him to stand firm on recent and forthcoming increases in APD. APD is a sensible tax: it falls mainly on wealthy people; it falls mainly on discretionary, rather than essential, expenditure; it is simple to collect; it also has an environmental benefit -- and that benefit is enhanced by the current changes which increase the duty on the longest flights, which are the ones that cause most climate change damage. As well, these tax breaks increases the tourist deficit - which has been estimated to mean the loss of around 900,000 UK jobs as people spend their money abroad instead of in this country.(Airport jobs: false hopes, cruel hoax. Sewill. AEF 2009)
Ryanair is blaming its decision to cut flights from Liverpool and Stansted on the increase in APD and is blaming APD for its decision to freeze expansion at all nine Ryanair UK bases.