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United Kingdom’s APD: Tax from hell?

Written by Nell Alcantara

(eTN) – The increase in United Kingdom’s Air Passenger Duty on April 1 has become a major cause of contention between the UK government and the global travel and tourism industry.

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(eTN) – The increase in United Kingdom’s Air Passenger Duty on April 1 has become a major cause of contention between the UK government and the global travel and tourism industry. Governments and tourism organizations are using very strong language to convey their opposition for APD, which in 2007 doubled and has been on a steady increase since 2009.

Perhaps the most vocal about the recent hike of UK’s air travel tax is Pacific-Asia Travel Association’s CEO, Martin Craigs. Mr. Craigs branded APD as a detention tax for UK residents during his appearance at this year’s ITB Berlin. “The UK is an island trading nation, air services are the vital lifeblood of modern global commerce. The UK Air Passenger Duty is now the world’s highest by a wide margin. It is certainly turning away tourism and trade with Asia Pacific, the world’s fastest growing economic region.”

He also made it clear that the Asian countries are not happy about how business is being conducted by some governments in Europe. He said, “the Asian countries are sick and tired of being lectured by Europe.”

World Travel & Tourism Council President & CEO David Scowsill was a little more specific when it came to voicing his organization’s opposition to APD. He said: “Air Passenger Duty is a completely disproportionate tax on people’s holidays and is hitting business travel hard. When the economy needs help, it is economically illogical to continue with a tax that costs the country some 91,000 jobs and as much as £4.2 billion.”

He added: “Travel & Tourism grew by 4.1% in the UK last year, but is forecast to slow to 1.3% in 2012. This slowdown is partly due to the impact of Air Passenger Duty, which is dampening demand.”

The WTTC leader added: “This tax is damaging the economy at a crucial time, and is having a negative effect on trade with countries in the Caribbean, Africa and Asia. We urge the UK Government to recognise the impact on the overall economy and reduce Air Passenger Duty.”

South Africa Tourism Minister Marthinus van Schalkwyk has also publicly acknowledged APD. At the Air Transport Action Group Aviation & Environment Summit 2012 in Geneva on March 12, he said: “What started off as a green tax, has now become a pure revenue-raising mechanism. It’s green credentials are long gone. The tax started off at a low level, but it is now a substantial tax on international tourism. And for those of us in the developing world that depend on eco-tourism, it is a tax on our green services exports.”

He added: “In this context, let me turn to the burning issue of the day, namely the inclusion of aviation in the European Union emissions trading scheme (EU ETS). Without necessarily questioning the underlying principles of this market-based mechanism, I do think it would be fair to say that the aggressive unilateralism associated with its introduction leaves a fairly bitter aftertaste. The strong reaction that it has triggered from across the world, including threats of a trade war, therefore did not come as a big surprise.”

The South African tourism minister added: “The potential competitive distortions as well as the potential supply chain disruptions that may result from this kind of unilateralism, counter-threats of a trade war, retaliation and an uncoordinated proliferation of equivalent measures are rather concerning – and remain so, whether you represent an airline with thin operating margins or a long-haul developing-country tourism destination that depends heavily on international airlift to create jobs and reduce poverty.”

eTN contacted VisitBritain Chairman Christopher Rodrigues for an official statement on APD. He said: “VisitBritain has no official stance. We are a government department. We are a government agency. The policy of the government is to charge APD. I would simply say that we always hoped that in doing its calculations, the government considers not just the tax benefit of the APD, but the total value of foreign tourists to the economy, and the value of the taxes that they pay on their spending. So on hotels, on their retail spending, it’s really important that you think about the total value, and you don’t just make decisions about APD.”

He added: “It is a major part of the revenue. All we hope as a government agency, which has actually benefitted from more support from this government than we have had in the previous decade, is that in doing their calculations, they consider the full value of the tourists to Britain and bear in mind that they make revenues. A lot of the revenues come from tourists when they are here, so you would not want to discourage people from visiting. That is the official view of the national tourism agency – you wouldn’t want to discourage people from coming to this country, because tourism is our third biggest foreign exchange earner and our fifth biggest employer. It’s a critically important industry in a period of austerity, when jobs, and finding new jobs, is very important. So we have a very simple view – we promote tourism with all the resources we are given, and we lobby very hard to insure to seek to get the government to understand the full benefit of tourism to the economy.”

According to WTTC, the UK government will collect £2.8 billion in extra tax from air travellers, far more than any other country in the world in the next 12 months.

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Nell Alcantara