AIR passengers are being taxed more than bankers and that may not change despite a review of a controversial levy on flying.
The Office for Budget Responsibility has forecast air passenger duty (APD) will raise £17.5bn from 2010-11 to 2015-16 compared to £12.6bn set to be taken by Chancellor George Osborne through the bank levy.
Air industry bosses in the region yesterday said the figures brought into “stark focus” the impact the levy is having on the region. The Journal’s A Tax Too Far campaign has led calls for the Government to change its approach to APD, which has a disproportionate impact on regional airports.
Business leaders have claimed the tax, which has steadily been increasing, could threaten North East business links with the international community, an avenue of growth which has been described as crucial to economic recovery.
Thousands of jobs in the region rely on key airlines, such as Emirates, operating their routes from Newcastle International Airport.
The new warning on the APD came from bosses at British Airways as it made representations to MPs investigating “green” taxes. The airline said: “In 2010-11, Air Passenger Duty is projected to raise £2.2bn in revenue. By 2014-15, this is expected to rise to £3.6bn. UK air passengers are being taxed more than bankers.”
After the figures were unveiled Graeme Mason, planning and corporate affairs director at Newcastle International, said: “These are big numbers, which really do bring into focus the scale of the APD issue and the impact it is having. People in the North East are paying a huge amount in tax for their holiday flights, and businesses are being penalised when they are traveling to important meetings.
“This is hitting demand, and affecting the viability of air services.
“The consultation into the possible reform of APD concludes in the next few weeks, and we will be setting out our proposals which could take some of the pressure off, help kick-start the regional economy, but also keep the Treasury happy by raising the same amount for the Exchequer.
“This has been a long fight on behalf of the region, but we are absolutely not prepared to give up.”
The spokesman for British Airways explained the airline recognised “the exceptional difficulty of the country’s fiscal position” and said it would be “content to pay” its “fair share”. He added: “But the UK airline industry is already the most heavily taxed in the world and any further tax burden would be counterproductive to the country’s economic recovery.”
But despite airline bosses’ warnings about the negative impact on the economy, the Treasury has declared that any reforms to APD will be “broadly revenue neutral” ahead of a consultation on potential changes ending later this month.
In its evidence, the Treasury said: “A consultation was launched at Budget to examine options for reforming the structure of APD. The aim is to deliver a simple, fair and efficient tax system for air travel from April 2012.
“Any changes to APD will be introduced on a broadly revenue-neutral basis and are not expected to have a significant effect on environmental emissions.”