The Caribbean will be the main beneficiary of changes to long-haul Air Passenger Duty to be introduced next year.
The Caribbean Tourism Organisation hailed yesterday’s surprise announcement in the Budget as a “complete victory” for the region’s lobbying efforts.
The air tax will be simplified into a two band system from April 2015 – Band A for short-haul flights of less than 2,000 miles from London, and Band B for all long-haul flights more than 2,000 miles from London.
The new Band B will be charged at the planned rate in 2015-16 of between £71 and £142, according to the CTO, with the highest two bands being scrapped.
CTO chairman Beverly Nicholson-Doty said: “This is a complete victory for the Caribbean, which, led by the CTO, has been lobbying against the unfair system which charged a higher rate of APD on flights to Barbados than Hawaii and placed the United States at a competitive advantage.
“We are delighted that the Chancellor has finally accepted the Caribbean’s proposal made in November 2010 to return to the simpler and fairer two band system.”
“Rest assured that the CTO, with support of our partners, will continue to advocate on behalf of the Caribbean tourism sector. We will now proceed to examine all the implications of this very positive development and advise our members accordingly.”
But Daniel Barlow, an indirect tax partner in the travel, hospitality and travel practice at Deloitte, warned: “The government’s commitment to retaining APD remains, probably for the simple reason that it raises around £3 billion of revenue per year and only costs 0.06 pence to collect for every £1 raised.
“However, the thrust of the lengthy industry and consumer campaigns calling for it to be cut have been around its apparent unfairness. The different rates of APD, depending on destination were at the top of the list of distortions created by the tax.”
He added: “It will be interesting to see whether this announcement leads to debate on some of the other distortions caused by the tax.
“For example, a passenger flying from Belfast to Alicante will pay £13 APD if they fly direct. However, they are likely to pay £26 APD if they make the same journey but book two connecting flights through London with budget airlines.
“Similarly, a three-year-old child travelling to the Costa del Sol on holiday will be charged £13 APD, the same as an adult passenger – clearly the fares charged for these passengers, and the amount of aviation fuel consumed to fly them, will be very different.
“It’s these types of distortion, as well as the tax itself, which the aviation industry will focus on ending.”