Chancellor George Osborne has announced a surprise reform of Air Passenger Duty in today’s Budget.
From April 1 2015, all long-haul flights will be moved into band B, meaning customers travelling to the Caribbean will pay the same as if they were travelling to the US.
He also confirmed that private flights would be charged APD.
The move will be seen as a big win for the Caribbean community, which has been lobbying for a change for several years.
Osborne said: “From next year, all long-haul flights will carry the same, lower, band B tax rate that you now pay to fly to the United States.”
The Budget document said: “To help British businesses strengthen links with high growth markets, and to go further to make the UK an attractive option for business visitors and tourists, Budget 2014 announces that the government will reform air passenger duty (APD) by abolishing bands C and D from 1 April 2015.
“This will eliminate the two highest rates of APD charged on flights to countries over 4,000 miles from Britain, cutting tax for millions of passengers travelling to China, India, Brazil and many other emerging markets.
“This will mean that flights to South Asia and the Caribbean will pay tax at the lower band B rate.”
The government will also extend the scope of the existing Regional Air Connectivity Fund to include start-up aid for new routes from regional airports.
The document also confirmed that, as announced in last year’s Budget, APD rates for 2014 will rise in line with inflation from April 1.
Rates applying to private jets will be set at six times the level of rates applying to economy class.
Responding to the news, Carol Hay, the Caribbean Tourism Organisation’s director of marketing UK & Europe, said: “This is fantastic news. The tiered banding for APD was simply unfair for many countries.
“The CTO and every Caribbean nation worked incredibly hard to make this tax fairer and we welcome the news of the review. We look forward to reviewing the detail as soon as possible”
Tui Travel chief executive Peter Long said: “We welcome today’s announcement by the Chancellor that APD bands C & D will be abolished from April 2015.
“We recognise the importance of this change and the difference that it will make to hardworking families in the UK, along with the tourism destinations worldwide that will benefit from reduced Air Passenger Duty rates.”
A statement from Virgin Atlantic read: “A two band APD rate is a very welcome simplification to remove some of the biggest distortions of the current system, which the Chancellor himself admitted is crazy and unjust. The government has rightly recognised the damage APD is having on exporters and the travelling public alike.
“A tax system which penalised high growth emerging economies such as China and India was always contrary to the government’s stated policy on trade and exports, so this is a positive step that recognises the impact of this economically damaging tax.
“There is a growing body of evidence demonstrating the huge economic benefits to the UK of reducing or abolishing APD and we hope that the government will continue to go further in the long run.”
Dale Keller, chief executive of the Board of Airline Representatives UK, said “The government has finally acknowledged what the industry and business knew all along – that the highest rates of aviation tax in the world were a brake on driving the UK’s economic growth with emerging markets.
“With regards to new route support from regional airports, we will need to evaluate any potential competitive distortion that could result, however, the government’s intentions are clearly supportive.
“Of course we would like the Chancellor to go further still on reducing APD, but this is a step in the right direction and BAR UK will continue its engagement with the government to deliver the fair and proportionate aviation tax that the UK deserves.”