Corporate travelers will have to pay more for flights after the Treasury doubled Air Passenger Duty for both long haul and short haul flights yesterday in a move it claimed was designed to reduce aviation emissions.
However, the so-called green tax rise, which was announced last December as part of Chancellor Gordon Brown's pre-budget report, is continuing to face criticism from airlines, tax experts and environmentalists.
Under the plans the duty for short haul flights will rise from £5 to £10, while the levy for longer haul flights will increase from £40 to £80. When announcing the move Brown signaled that its intended impact was to tackle aircraft emissions, claiming that "while we continue to work internationally to seek a global agreement on reducing aviation emissions, each country must take action domestically".
A spokesperson for the Treasury insisted the levy would have a major impact on carbon emissions, claiming that the estimating the increase will save the equivalent of three quarters of a million tonnes of carbon every year by 2011.
However, Patrick King, Tax Principle at accountants MacIntyre Hudson, disputed whether the tax would have much of an impact and argued that referring to the duty as a green tax was a misnomer. "An £80 levy on a transatlantic flight may seem significant, but it is not really going to stop anyone flying," he said. "This is an easy means of raising taxes, but it is not going to change behaviour – if [Brown] was serious about that he would have to double the cost of flying."
King accepted that the government may use this as a starting point to raise taxes on flying further, but argued that without large increases the move would simply raise revenue rather than limit emissions. "If you just ease in higher levies over time people will just adapt as they already do with petrol duty," he said. "I suspect Air Passenger Duty will continue to go up, but to call it a green tax is a case of jumping on the bandwagon."
His comments echo those of several environmental groups, which have also argued the scale of the levy means it will have no impact on passenger numbers.
King argued that if the government wanted to create a tax regime to encourage green behaviour it would be better advised to expand tax incentives to those firms that invest in environmentally friendly technologies.
"There are schemes out there but they are not being widely supported and the government needs to do more to publicise and expand them," he said. "In the case of flying making it more expensive for people to fly is not going to have much impact and could hamper the economy so the government would do better to make it easier for the airlines to invest in cleaner engine technologies."
King also argued that the Treasury would secure greater support for green taxes if they ring fenced the money raised and pledged to invest it in environmental initiatives – a move he predicted the Tories would soon propose.
In the initial pre-budget speech Brown did say that the increase in air duty would secure "extra resources in the coming spending round for our priorities such as public transport and the environment", but the Treasury remains reluctant to explicitly assign revenue from green taxes for green initiatives.
Airlines have also criticised the move claiming they were not given enough notice about the change in the levy. As a result many airlines have been forced to contact customers who booked before the levy was announced and ask them to pay the extra fee, a move some critics have argued will discourage public support for green taxes.
However, a government spokesperson insisted the Treasury had been happy to discuss practical issues surrounding the levy with airlines and also argued the levy was just part of a wider strategy to curb airline emissions. "The Treasury continues to believe that the inclusion of aviation in the EU Emissions Trading Scheme is the most efficient and cost-effective way to aid this sector in meeting its external costs and playing its part in tackling climate change," she said. "And we continue to work with our European partners to achieve this."
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