Ireland is to abolish a €3 per passenger air travel tax from next April.
The Irish tourist industry welcomed finance minister Michael Noonan’s pledge to ditch the tax and leave the hospitality sector’s 9% VAT rate unchanged.
Noonan said the Irish government plans to cut the air travel tax to zero, but in return expects airlines to respond by opening new routes and building traffic.
“I have reason to believe they will do so,” he added.
The Minister said that the reduced 9% VAT rate introduced for businesses such as restaurants, hotels and guest houses, and newspapers in 2011, would not change.
The rate was cut from 13.5% in July 2011 in a move which created 15,000 new jobs.
Aer Lingus welcomed the decision to eliminate the air travel tax. The carrier said it had always been its position that the tax reduced demand and was counterproductive.
Neil Pakey, chief executive of Shannon airport, said that the decision was timely and proactive.
He told the Irish Times: “For international airports like Shannon, this initiative may help tip the balance in our favour when it comes to convincing airline customers to enhance existing and put on new services.”
But Sinn Féin economy spokesman Daithí McKay called on Northern Ireland finance minister Simon Hamilton to match the cut, the BBC reported.
Air Passenger Duty is a devolved matter and the Northern Ireland Executive has already abolished it on long-haul flights from Belfast.
That move, effective from the start of the year, was taken after fears that Northern Ireland could lose its direct flight to New York.
Hamilton said that the move by the Dublin government was “not really a surprise” but it would be prohibitively expensive to match the cut.
He added that he believed that the reduction of APD was a matter for the whole of the UK and lobbying of Westminster on the matter would continue.