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BAR UK calls for Aviation Duty, scheduled to replace Air Passenger Duty (APD), to be rescinded

BAR UK Presse Release 24 Apr.08

The Treasury's proposed Aviation Duty is so ill-conceived that the Board of Airline Representatives in the UK (BAR UK) has called upon the Treasury to rescind it.

Aviation Duty, for which the consultation period ended today, is scheduled to replace Air Passenger Duty (APD) in November 2009. Whereas APD is structured on a per passenger basis, aviation duty would be levied per departing flight in the UK, structured around Maximum Take Off Weight (MTOW) and the distance flown.

BAR UK has provided eleven reasons why this duty should not be introduced (see summary below).

BAR UK's Chief Executive, Mike Carrivick, said: 'the proposal to introduce aviation duty is a very clumsy attempt to disguise a declared money-taking opportunity as an environmental initiative; nothing could be further from reality.

'Money is continuing to be grabbed from airlines and their passengers, yet none of it is scheduled for any specific environmental purpose.

'Apart from the many legal aspects that arise, this duty would impose competition distortions and drive business away from the UK. It also fails the Treasury's own stated principles in so many ways.

'The practicalities of this duty fail the theory in devastating ways; it must not be introduced'

The way forward is not via taxation but through a properly-designed emissions scheme, linked to the major drivers of efficiencies through technology, operations, infrastructure and positive economic measures. These measures are encompassed in IATA's four-pillar strategy.

For editors:
The Board of Airline Representatives in the UK (BAR UK) Ltd represents 90+ scheduled airlines in this country in their dealings with Government, government departments, regulators and airport operators. Full details of its work, and the Board, can be found on www.bar-uk.org.

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SUMMARY of RESPONSES (Aviation Duty)

Taxation schemes do not contribute to environmental performance. Aviation taxation schemes are blunt instruments, including the current Air Passenger Duty (APD).
In place of taxation, a properly-designed Emissions Trading Scheme would be a much more effective tool. It needs to be global and voluntary, and aimed at supplementing the reductions in emissions that can be achieved through the major drivers of efficiencies through technology, operations, infrastructure and positive economic measures. These four drivers are encompassed in IATA's four-pillar strategy.

Revenue-driven proposal This duty has been proposed merely to generate revenues for the Exchequer. It has the proclaimed objective of generating an additional 520m per annum, but no specific objectives in respect of environmental mitigations.

Aviation is already more than its fair share in environmental costs, and in its contributions to support public services.
Aviation already makes a positive contribution of 2bn to the Treasury through APD, the equivalent of four times the estimated environmental impact of UK aviation emissions.

The proposed tax fails the Treasury's own 'Principles of a per plane duty'. Specifically, there would be:
extensive competition and market distortions
the loss of jobs and economic activity in the UK, leading to government revenue reductions in other areas eg VAT, and increase spending in social and unemployment benefits
a lack of clarity and transparency
widespread consumer confusion
a conflict with the Chicago Convention

UK exports will be made more costly.
Taxing freight will specifically, and adversely, affect exporters and the cargo transhipment business in the UK, making them, and the UK, less competitive. It could also result in the relocation of a significant portion of all-freight operations to airports outside of the UK.

The consultation is incomplete.
As the proposed tax amounts themselves have not been published in conjunction with the proposed structure, it is not possible to properly assess the financial impacts on existing routes or aircraft operators, let alone the impacts of the wider scope of this duty.

The proposed charging criteria are not accepted
The proposal to use MTOW as part of the charging basis is fundamentally flawed, and should not be adopted. The other two options are more flawed due to the uncertain nature of the data.

Administration preference is unacceptable
Strong objections exist in respect of the proposed administration process, where the collection and administration is favoured via licensed airports.

The duty, if implemented, must be collected directly from airlines.

The Impact Assessment: Incorrect geographic coverage statement
The Impact Assessment is incorrect in stating that the geographic coverage of the policy/option is the UK. The duty specifically extends to all parts of the world, and openly taxes airlines for emissions outside of UK airspace.

The impact also extends to some foreign airlines, in respect of their '5th Freedom' rights. That is their right for them to pick up passengers in this country who are destined for a third-party country e.g. Air India carrying passengers from London to New York).

For further information contact:
Mike Carrivick, FRAeS
Chief Executive BAR UK
Tel: 020 7393 1261
Fax: 020 7393 1206
Mobile: 07747 612840

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