Fears are rising that a shift from Air Passenger Duty to a per plane tax will provide the new coalition government with the opportunity to increase the tax burden on the travel industry.
Weekend reports suggested pressure from the Liberal Democrats may have forced the Conservatives to push through a higher level of the new tax than the party may have previously agreed to.
While a per plane tax would bring cargo and private jets into the tax regime, concerns are being raised that fares could rise by more than £100 for a long haul flights and around £30 for short haul.
Details are due to be spelt out in tomorrow’s emergency budget which will see wide ranging tax measures announced in a bid to cut the country’s multi-billion pound deficit.
Abta has already expressed fears that the proposed changes could be used as an excuse to further raise taxes.
Both the Conservatives and Liberal Democrats signalled a shift away from APD – which is due to rise again in November – to a per plane tax in their election manifestos.
But the Lib Dems took a harder line on aircraft taxation, talking about a higher rate to try to stem domestic flights on environmental grounds as part of measures to raise more than £5 billion a year from the industry, up from around £2 billion currently.
Chancellor George Osborne’s austerity budget is also expected to detail a raft of other tax rises – such as a hike in VAT - which could limit consumer disposal income.
There are also suggestions that VAT could be extended to cover domestic flights by declaring them as “luxury items”. Such a measure cannot be imposed on international flights.
Any switch to a per plane tax is not likely to be introduced until next year.
Click here to see original article Travelweekly, Monday, June 21st, 2010
