Axing APD 'would make £16bn for UK'

AirplaneScrapping the air passenger duty (APD) airport departure tax would boost the UK economy by at least £16 billion in the first three years, according to a report.
The abolition of the unpopular tax would result in almost 60,000 extra jobs in the long term, the report added. Commissioned by four UK airlines including British Airways, the report added that scrapping APD would pay for itself by increasing revenues from other sources such as income tax and VAT.

The boost to GDP (gross domestic product) would come from three main sources, the study said. Extra investment by airlines to expand their networks, and investment by other aviation businesses to support this growth; a net increase in inbound tourism; and over the medium term, higher business productivity resulting from increased business travel, which would improve international business connections and create employment.

The report from financial services company PricewaterhouseCoopers (PwC) said: "Abolishing APD has the potential to reduce the cost of flying, making it cheaper for businesses to maintain relationships with overseas customers. In this sense APD could be regarded as a tax on exports."

It went on: "APD is at least as damaging to the UK economy, and probably more so, than corporation tax or fuel duty."

Introduced in 1994, APD has, since January 2007, increased by up to 260% for short-haul flights and up to 360% for long-haul ones. Caribbean tourism has been particularly hit by an anomaly in the way APD is calculated which has resulted in flights to popular West Indies destinations such as Barbados, Antigua and St Lucia being more heavily taxed than longer ones to the west coast of the USA.

Virgin Atlantic, Ryanair and easyJet were the other airlines for whom PwC prepared the report. Responding to the report, the bosses of the four airlines said: "The report highlights the critical role that aviation plays as an engine of economic growth for both international commerce and tourism.

"It proves that APD is one of the three most destructive taxes, alongside corporation tax and fuel duty. The Chancellor has taken action on those two taxes in the Autumn Statement and we would encourage him to use the forthcoming Budget to remove APD to stimulate economic growth and create jobs."

The airline chiefs went on: "Should APD be abolished, the aviation industry would be able to move quickly to add new flights in and out of the UK, or invest in new products and services, creating new opportunities for businesses and much-needed jobs across the UK."

A Treasury spokesman said: "Despite current pressure on the public finances and the challenge of cutting the deficit, the Government has limited any rise in APD to inflation since 2010. During this time APD rates have increased by just £1 for the majority of passengers. We do not recognise the figures in this report or agree with the assumptions behind it."
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