Consultation into cutting Air Passenger Duty on domestic flights suggests the tax would rise for long-haul trips.
The Treasury issued its proposals on Tuesday, saying that “the government’s initial policy position is that an increase in the number of international APD distance bands would align APD more closely with our environmental objectives”.
This would reinforce the ‘polluter pays principle’, by ensuring that those who travel furthest internationally, and consequently have the greatest impact on the environment, incur the most APD, according to the document.
“This also ensures that the overall proposed package of reforms balances our domestic connectivity and environmental goals, as well as maintaining the sector’s contribution to the public finances,” the consultation added.
However, the option for a levy on frequency flyers is seen as more complex to administer than the air tax “on the basis that it could require the government to collect and store personal information on each passenger”.
It added: ”The government is therefore minded to retain APD as the principal tax on the aviation sector and not introduce a frequent flyer levy as a replacement, and welcomes views on this position.”
The consultation proposes that the effective rate of APD on domestic flights should be reduced, “in order to support Union and regional connectivity”.
The cut would apply to all flights departing from a UK airport to a destination within the UK.
Two options are under consideration – an APD exemption for the return leg of domestic return flights or the introduction of a new band for domestic flights.
Rates could be halved from £13 to £7 per flight after the collapse of Flybe a year ago and the Covid-19 pandemic hit passenger carryings which were already in decline from a peak of 22.6 million in 2007 to 19.2 million in 2019.
APD raised £3.6 billion in 2019-20 as the principal tax on the aviation sector which pays no fuel duty and sells tickets VAT free.
But revenues from the tax “significantly declined” following the reduction in passengers caused by Covid-19, with receipts in summer 2020 down by almost 87% year-on-year.
The document said: “The government is committed to ensuring public finances are on a sustainable footing as we recover from Covid-19 and that any reforms to APD meet this objective.
“Revenue raised by APD funds vital public services for people and families across UK, and this proposed package of reforms reflects this.”
A number of options are being considered including only charging APD one-way for domestic flights – previously outlawed when the UK was still in the EU – or introducing a lower band for domestic flights.
“Ensuring UK-wide transport connectivity is a central pillar of the Government’s commitment to supporting the Union between England, Scotland, Wales and Northern Ireland and levelling up all parts of the UK,” the consultation said.
“Such connectivity fosters integration across the Union, support local economies and helps ensure all parts of the country can benefit from our global connections.
“Domestic air connectivity has an important role to play within this, particularly by linking those areas where road and rail alternatives are not available or take a long time.”
Aviation levies have been split into two bands: flights to destinations up to 2,000 miles away, and flights travelling more than that distance.
An economy flight from London and Edinburgh can cost less than £50 with £13 – more than a quarter of the overall price – in APD.
Loganair chief executive Jonathan Hinkles told the Telegraph: “We are heartened to see the consultation around the promised changes to air passenger duty, which cannot come a moment too soon for domestic air travel.
“The ability to make the change is one of very few benefits for the aviation industry from Brexit and it will help to address the significant loss of connectivity throughout all parts of the UK caused by APD.”
But a spokesman for British Airways owner IAG said: “We have always said that APD should be abolished.
“Given the acute pressure on business, the hike in international APD will make it even harder for UK firms to trade overseas. This is a tax on Global Britain. We will be submitting our views in due course.”
The consultation runs until June 12 with email responses to be sent to: ETTAnswers@hmtreasury.gov.uk
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