AIR PASSENGER DUTIES

Variation in Air Passenger Duties at Cardiff Airport

Variation in Air Passenger Duties at Cardiff Airport

LITERATURE REVIEW

Air passenger duty (APD) is charged on all passenger flights from UK airports. The rate of tax varies according to passenger destination and the class of passenger travel. The tax is estimated to raise £2.9 billion in 2012/13. Some commentators have argued that APD should be charged on planes rather than passengers, to provide better incentives for passengers and airlines to cut carbon emissions from aviation. In January 2008 the Labour Government launched a consultation on just such a change, but in November that year the then Chancellor Alistair Darling announced that instead of a per-plane duty, APD would be restructured: the tax would be based on four geographical bands set at intervals of 2,000 miles, so that travellers flying farther would pay a higher rate of duty (Carlson, 1981).

The new structure took effect from 1 November 2009, despite concerns about the impact of the new system for passengers making long-haul flights, particularly those making journeys to the Caribbean (Wyckoff, 1977 ). During the election campaign both the Conservatives and the Liberal Democrats argued for reforming APD, and in its first Budget on 22 June 2010 the new Coalition Government stated that it would “explore changes to the aviation tax system, including switching from a perpassenger to a per-plane duty.”

In the 2011 Budget the Government announced that it would not proceed with a per-plane duty “given concerns over the legality and feasibility of this approach”. It published a consultation paper setting out options for simplifying the rate structure as well as proposals to extend the scope of the tax to flights on business jets to create “a simple tax system for air transport services in the UK, which does not hamper growth, which ensures a fair contribution toward the public finances from the sector and which is consistent with the Government's determination to reduce emissions across all parts of the economy” (Williams, 1994). At this time the Government also said that while it was assumed that duty rates should go up each year in line with inflation, the rates of duty would be frozen for twelve months, with the increase for 2011/12 deferred until April 2012 (Meyer, 1981).

Air passenger duty (APD) is charged on all passenger flights from UK airports. The rate of tax varies according to passenger destination and the class of passenger travel. Since the tax was first introduced in 1994 some commentators have argued that APD should be charged on planes rather than passengers, to provide better incentives for passengers and airlines to cut carbon emissions ( Wainwright, 1987).

Amid rising concerns about the environmental impact of aviation, the Labor Government launched a consultation on reforming the tax in January 1998 (Carlson, 1981). However, in November that year the then Chancellor Alistair Darling announced that instead of a per-plane duty, APD would be restructured: the tax would be based on four geographical bands set at intervals of 2,000 miles, ...