The Federation of Tour Operators challenged the Government in the High Court this week over the doubling of Air Passenger Duty.
The FTO and members TUI UK and Kuoni argue APD is unlawful under the Chicago Convention of 1944. They also say the effect on tour operators breached their rights.
They argue Treasury officials forgot the Package Travel Regulations would prevent tour operators passing the increase to passengers in the way airlines could.
Charles Haddon-Cave QC, for the FTO, argued substantial lead-in times were allowed when APD was introduced in 1994 and amended in 1996 and 2000 because “the Treasury recognised the Package Travel Regulations place tour operators in unique difficulty”.
But when the then Chancellor Gordon Brown announced the doubling of APD on December 6 2006, he gave less than two months’ notice. The trade had sold four million holidays for travel after February 1, the day of the increase, and had to absorb the cost.
First Choice chief executive Peter Long wrote to the Chancellor arguing the retrospective tax amounted to 10% of the company’s UK profits, and industry representatives sought either an exemption for existing bookings or a longer lead-in time.
Haddon-Cave acknowledged the latter would slash revenue to the Treasury, but argued the problem arose from a failure to give more notice.
He said APD was incompatible with Article 15 of the Chicago Convention, which established: “Governments can’t charge people simply for flying.”
The only case in UK or European law that referred to the Convention had resulted in a Belgian court ruling a district council’s tax on airport operation unlawful in 2005, said Haddon-Cave.
However, leading airlines have declined to join the court action, with one aviation source suggesting the FTO has little chance of victory. The hearing was expected to last until the end of the week.