Abta has vowed to fight on for changes to Air Passenger Duty (APD) after the government ruled out all changes demanded by the industry.
In a consultation response this morning, the Treasury rejected arguments for a switch from the current four-band system of APD rates which unfairly penalises destinations such as the Caribbean.
It also rejected demands to have premium economy fares taxed at the same rate as economy flights, instead of the same rate as first and business class as at present.
Abta head of public affairs Luke Pollard said: “This issue has not been put to bed. It remains a live issue for us, for the industry, for passengers and for destinations. It will galvanise the industry to do more.”
The industry consultation earlier this year produced wholesale demands for reform of APD as well as demands for reduced rates of tax.
In response, the Treasury said: “No banding structure will be entirely free of anomolies. A revenue neutral change to the current bandings would require some passengers to pay more . . . The government has decided to retain the current banding structure of APD.” That means flights to the Caribbean will continue to be taxed at a higher rate than to Florida, San Francisco and the US Pacific islands.
The government also rejected a central demand of airlines and Abta that the costs of the European emissions trading system (ETS) be offset against APD. In its response today, the Treasury said: “APD is primarily a revenue-raising duty.”
The Treasury said the distinction in APD rates between economy and premium economy would remain “to maintain the simplicity of the tax and avoid additional burdens”.
Pollard said: “The government has heeded none of the advice it was given. It is very disappointing. But it has not made any of the arguments less valid. The Treasury is failing to collect the money it expected to from APD because fewer people are flying and fewer people are attracted to the UK.”
The government has not ruled out introducing a distinction in tax rates between departures from UK regional airports and from the southeast.