Monday, 1 December 2014

Advance Passenger Duty Needs to be Reformed

With the news that one of Britain's most loathed taxes is 20 years old this week it got me thinking about just how much this loathsome tax costs everyday people.

A family of four flying to a destination outside Europe will  pay £284 in tax, compared with just £40 when the levy was introduced on November 1, 1994.

That seven-fold increase in APD has taken place while inflation has not even doubled over the same period.

APD, which is the highest aviation tax imposed anywhere in the world, has also hugely outstripped other UK taxes such as petrol duty, road tax, duties on alcohol and insurance premiums over the last two decades. Annual Treasury revenue from APD is now nearly ten times as much as in the tax's first full year. In total, air passengers in the UK have paid more than £26 billion in APD since 1994.

Even on short-haul flights, APD has become a big proportion of the ticket price. The £26 APD payable per person on a return flight within the UK is frequently at least a quarter of the total fare.

According to City analysts PwC, abolition of APD would boost Britain's economic growth by 0.5 per cent within a year and lead to the creation of 60,000 new jobs without reducing the Treasury's net revenues. Now that really is something the government should ponder.