APD is the highest air passenger tax in the world and together, Aberdeen, Edinburgh and Glasgow Airports have made the case for its devolution to Holyrood to allow, in line with the Scottish Government’s commitment, for its reduction and eventual abolition.
In addition to costing Scotland over two million passengers per annum, a 2012 report, commissioned by the airports, warned that by 2016 APD will cost the Scottish economy up to £210 million in lost tourism spend per annum.
The UK Government has significantly increased rates and restructured APD since 2007. Rates for short haul travel have increased by around 160% with long haul rates increasing between 225% and 360%.
In April 2013 the Republic of Ireland scrapped its equivalent of APD entirely, leaving the UK as one of just five countries in Europe to levy a passenger departure tax. The tax raised £2.9bn for the UK Treasury in 2013-14, (approximately £200m from Scotland) however, research by PwC suggests that reducing or abolishing APD would pay for itself.
Amanda McMillan, managing director of Glasgow Airport said: “If Scotland is to attract and sustain the routes that will enable it to compete effectively in the global marketplace then it is imperative the issue of APD is addressed. It is a significant barrier to growth and it also makes it extremely challenging to maintain our existing routes. Despite repeated representations to the UK Government, the industry and passengers have had to endure continued increases in this damaging tax. The reforms announced earlier this year by the Chancellor and which will come into effect in 2015 fall short of providing any material benefit to Scotland’s airports.
“Given Scotland’s reliance on aviation and the Scottish Government’s appreciation of the role it plays in supporting our economy, we believe it should have full control over APD with a view to it being reduced and eventually abolished.”
Gordon Dewar, Chief Executive of Edinburgh Airport, said: “Scotland’s airports unanimously agree that air passenger duty is hugely damaging to our industry. We‘ve argued long and hard for its reduction or abolition and have been ignored but now the evidence for its devolution to Scotland speaks for itself.
“Ryanair has already committed to delivering over one million new passengers in the event of APD being abolished so it’s obvious that airlines support our argument. They’re already indicating the size of the prize that’s just beyond our grasp.
“Following a year of unprecedented success and attention for Scotland it would be foolish not to harness this opportunity to deliver a tremendous boost to our country’s tourism industry. We shouldn’t wait for another two years of negotiations to end when we have the opportunity to devolve APD to Scotland now and have immediate control over its reduction and future abolition.”
Aberdeen managing director Carol Benzie was encouraged by the support received from across the political divide. She said: “It says a lot about an issue when there is near-political agreement on the subject across a number of parties, as well as support from the public and from businesses. The calls to completely reform this tax regime have been growing steadily louder over the years and are now almost unanimous north of the border. What we have is the perfect opportunity to make a real difference. By devolving control of this damaging tax regime we can transform Scottish aviation in the interests of all our passengers.”
APD is an excise duty, set by the UK Government, which is levied on the carriage of chargeable passengers from a UK airport on chargeable aircraft. APD was extended to smaller aircraft including business jets in April 2013. This includes all flights on aircraft with an n authorised take-off weight of 5.7 tonnes or more. The higher rate of APD applies to flights on aircraft of over 20 tonnes but with fewer than 19 seats.
APD rates are set by the UK Government. However, the Finance Act 2012 devolved to the Northern Ireland Assembly (NIA) the power to set APD rates on direct long haul flights from Northern Ireland. With effect from 1 January 2013, the NIA legislated to set these devolved rates at £0. Northern Ireland’s direct long-haul flight rate is administered on the Northern Ireland Executive’s behalf by the UK’s tax authority, HM Revenue and Customs (HMRC).