A study commissioned by British Airways, EasyJet, Ryanair and Virgin Atlantic suggests that abolishing APD could boost UK’s GDP by “at least £16 billion [$25 billion) in the first three years and result in almost 60,000 extra jobs in the UK over the longer term.”
The study, Economic Impact of Air Passenger Duty,conducted by PricewaterhouseCoopers, said that getting rid of APD would pay for itself by increasing revenues from other sources such as income tax and value added tax. “This net benefit, even after allowing for the loss of APD revenue, would be almost £500 million in the first year” and would average £250 million a year annually over the period to 2020, according to the study.
The boost to GDP would come from extra investment by airlines and other aviation businesses; a net increase in inbound tourism; and higher business productivity over the medium term.
It said APD is a “substantial business cost,” equating to about £500 million a year for UK businesses overall, and could in effect “be regarded as a tax on exports.” It argued that APD was “at least as damaging to the UK economy” as corporation tax or fuel duty, but that while recent budgets stemmed rises in fuel duty and reduced corporation tax, APD had risen continually. “Since January 2007, APD has increased by up to 260% for short-haul flights and up to 360% for long-haul,” the report stated, pointing out that those figures relate to economy class and APD is double in premium cabins.
Last week, the House of Lords debated the issue and urged the Chancellor to undertake “a proper macroeconomic impact assessment into APD across the whole of the UK economy,” according to Adrian Palmer, who tabled the debate. He said, “There is a growing body of evidence that points to the profoundly damaging impact of APD on our economy.”
The Treasury expects to raise £2.9 billion from APD this year, and plans future rate increases, taking revenue to £3.9 billion by 2016/17.
(Anne Paylor - ATWOnline News)