US prepares to fight UK's green aviation tax plan

The coalition government's plan to reform aviation taxes in order to better encourage airlines to cut carbon emissions could face a legal challenge after it emerged the US government has already begun lobbying against the move.

The Sunday Times reported yesterday that the US embassy in London has privately called on the coalition to water down its green tax plans over fears that it will increase the financial burden on transatlantic operators.

An unnamed minister told the paper that the government was sticking by its plans to replace the current Air Passenger Duty with a per-plane levy that would encourage airlines to operate fuller aircraft.

"The US embassy has made representations siding with the airlines," the minister said. "But the Americans will not deter us from doing the right thing both for taxpayers and the environment."

The proposed reforms were included in both the Conservative and the Lib Dem’s election manifestos and are a key component of the coalition's programme for government. The changes are expected to be confirmed by the Treasury in the autumn and could come into effect as early as next year.

However, with ministers having signalled that they are keen to increase green taxes, airlines are concerned that the changes could provide the cover for an increase in the tax burden imposed on the industry, and US airlines are already considering legal action against the changes.

The US aviation industry is already in the throes of a legal challenge against the EU's move to extend its emissions trading scheme to cover flights to and from the EU. A coalition of US airlines has launched a legal action in the UK arguing that the EU does not have the jurisdiction to apply charges to flights to and from the US, and that the move breaches the 1944 Chicago Convention covering international aviation.

The industry would be likely to use a similar argument to challenge any UK proposal that would increase levies for transatlantic flights.

A spokeswoman for the Treasury told BusinessGreen.com that the final decision on the new tax would be made by Chancellor George Osborne, although she added that the coalition agreement "sets out very clearly the government position on new plane duty".

The US embassy told the Sunday Times that it would not comment on reports it has been lobbying against the per-plane levy, but admitted it was concerned about the proposed tax reforms.