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UK government freezes APD, won’t replace it with Per Plane Duty

ATW Daily News by Cathy Buyck 24 Mar.11

The UK government decided not to replace the country’s current Air Passenger Duty with a “per plane duty,” and it froze the APD at current levels, delaying the planned increase for a year. It also dropped plans to impose the tax on transit and transfer passengers as well as non-passenger services, notably dedicated freight transport. It did, however, propose extending the tax to private aircraft users, drawing protests from business aviation user groups. The measures were announced Wednesday in Chancellor of the Exchequer George Osborne's 2011 budget statement.

Last June the government indicated it would explore changes to the tax, including the option of switching from a per-passenger to a per-plane duty (ATW Daily News, June 24, 2010). A PPD, which is supported by low-cost carriers such as easyJet, reflected the government’s view “that airlines should be encouraged to fly planes as full as possible and operate more efficiently, thereby minimizing their impact on the environment,” according to the Treasury consultation document.

As part of Wednesday's decision, the government also said it will study reforms to the APD's four-band structure, which has been criticized for anomalies that mean passengers pay a higher tax to fly to the Caribbean than to California and the fact that economy class passengers are assessed a higher charge if they are traveling in premium economy or economy plus. The government will also look at the impact of the APD on regional airports in the UK.

IATA welcomed the decision not to increase the APD but reiterated its call for the UK “to commit to abandoning completely its APD—long touted as an environmental tax—if plans continue for aviation to join the EU Emissions Trading Scheme in 2012.” (ATW Daily News, Feb. 14)

The Board of Airline Representatives in the UK, representing 86 airlines, called on the chancellor to reduce APD levels once the EU ETS comes into effect. “The UK travel industry already pays the highest aviation taxes in Europe and the existing APD levels do not take into account the EU ETS which airlines will pay into from January 2012,” CEO Mike Carrivick said. “For air travelers to pay twice is wholly unjustified."

EasyJet Chief Executive Carolyn McCall welcomed the proposal to extend the tax to passengers on private aircraft but said the carrier will continue to campaign in favor of a "fairer, greener per plane tax."

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