Diplomatic row over flight taxes

Updated 08.07 Sat Jun 07 2008
Keywords: flights, tax, airlines, Chancellor Alistair Darling, United States

Plans for "green" changes to taxes on flights have sparked a diplomatic row with the United States.

Chancellor Alistair Darling announced last autumn that, from November 2009, taxes on flying will be switched from individual passengers to flights to encourage more efficient use of planes and cut emissions of greenhouse gases.

"The Treasury's proposal, although cast as an environmental measure, appears in reality to constitute nothing more than a device for generating additional revenue from the airline community" - US Embassy in London

Ministers argue that charging the tax on tickets rather than flights encourages airlines to fly virtually empty planes instead of cutting numbers of services and maximising the use of seats.

But the move has provoked protests from the US, which has questioned whether it is genuinely an environment protection measure or simply designed to raise revenue from the airline industry and travellers.

A letter from the US Embassy in London to the Treasury warns that the proposed duty "raises serious legal questions" and could breach a number of international agreements.

The six-page letter reads: "The Treasury's proposal, although cast as an environmental measure, appears in reality to constitute nothing more than a device for generating additional revenue from the airline community."

It continues: "There is no linkage between the funds collected from airlines and the mitigation of any environmental impact of airline emissions or any other environmental problem. Moreover, the Treasury's proposal does not demonstrate that the new duty would influence airlines to adjust their fleets or their booking practices to achieve higher load factors.

"Nor are any data provided to justify the levy based on an assessment of damage from aircraft emissions."

The Government is still consulting on the scheme and has not announced the rates at which the new tax would be charged, but Mr Darling said in March that he expected overall revenue from plane duty to be increased by 10 per cent in the second year of the new per-flight regime.

Airlines fear that the change will lead to a large hike in the £2 billion a year already taken in from flight taxes, with long-haul services particularly hard-hit and the cost passed on to passengers in increased ticket prices.

Some industry figures believe that the amount paid by transatlantic travellers in economy could rise from £40 to £100 and that some passengers may choose to fly to European airports to transfer on to flights to the US in order to avoid the charge, hitting the business of the mainly British and American airlines which fly direct from the UK to the States.

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