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Long-Haul Travel

UK departure tax "short-sighted" and could shut down many British airports

Nelson Alcantara  Aug 04, 2009

The London-based World Travel & Tourism Council (WTTC) has announced its opposition towards the revised UK Airport Departure Tax, citing the tax “will discourage long-haul travel, reduce UK spending in emerging markets, and thereby undermine the government's support of the Millennium Development Goals.”

"The UK government's decision to increase the Air Passenger Duty (APD) for departures from UK airports from this coming November, shows that it continues to underestimate the economic importance of travel and tourism," said WTTC president and CEO Jean-Claude Baumgarten, adding WTTC's support to the widespread opposition already voiced by the industry around the world.

"We strongly endorse the government's decision to review the level of duty proposed for air travel to the Caribbean," Baumgarten added, "since this is particularly unfair. It is based on an illogical system of bands that means travelers will pay a lower tax to travel to many points of the USA that are much farther from London than any island in the Caribbean.

"But we believe the overall APD system should be scrapped," he said.

WTTC has said it is convinced the UK government's move to increase the APD is “very short-sighted given the current recession, since travel and tourism - more than any other sector - has the potential to kick-start the economic recovery by stimulating continued spending on travel, thereby generating much needed employment.”

"Of equal concern is the fact that the APD is billed as an environmental tax, yet none of the money so far collected has been hypothecated and ploughed back into either the environment or the industry," said Baumgarten.

According to WTTC, even more seriously, the fact that the imposition of this tax will reduce UK tourism spending in developing countries, undermines the UK government's claims to be supporting the Millennium Development Goals, aimed at alleviating poverty and generating employment in emerging markets.

"The APD acts as a distortion to free trade," said Baumgarten, "and this will ultimately work against the Millennium Development Goals by crippling regions most in need of travel and tourism to run and support their economies.

"Take the example of the Caribbean," Baumgarten noted. "UK spending on tourism in the region totaled £1.45 billion in 2008 - a significant contribution to these island nations, for which the travel and tourism economy contributes 14.5 percent of total GDP."

Despite the challenges of the current recession, the travel and tourism industry has not requested any direct public sector subsidies, Baumgarten argued. But it should not discourage travel - nor use the industry as a cash cow to try to fill the treasury's depleted coffers. Instead, the government should be looking to provide a supportive policy framework to help sustain demand through the downturn and ensure that valuable aid to developing countries is not cut off by a reduction in travel by UK citizens to those destinations.

The increased APD, which is being implemented in two stages, from November 2009 and November 2010, and which primarily penalizes long-haul travelers, will mean a 112 percent rise in departure tax on a flight to Australia from the end of 2010.

"Clearly, this will have a very damaging effect on demand," said Baumgarten, "and at a time when demand is already very sluggish due to the recession and factors such as the H1N1 influenza virus.

"Moreover, the move which is intended to help reduce carbon emissions is also likely to backfire," Baumgarten added, "since passengers traveling to long-haul destinations will probably choose to use airports in continental Europe as their departure point for their long-haul flights. This would likely increase short-haul flights out of the UK, and so end up increasing, rather than decreasing, carbon emissions."

Joining WTTC in voicing its opposition to the APD is the Trinidad and Tobago Coalition of Services Industries (TTCSI), which stated that it joins with the Caribbean community in its strong objection to the UK government’s tax increase plans. “We view the APD as unnecessary and discriminatory. It is a particularly stinging slap in the face when one considers that the recently-signed Economic Partnership Agreement (EPA) is supposed to expand trade and result in developmental benefits for the Caribbean,” said TTCSI president Lawrence Placide in a statement.

“This tax will require UK tourists, already dealing with the effects of an economic slowdown, to pay more to come to the Caribbean. The fact that a family of four will have to pay as much as £400 more to come to the region (this will increase to as much as £600 in 2010), makes the magnitude of the impact quite clear. They will simply go elsewhere. The drop in arrivals will have a ripple effect through the rest of the economy,” the TTCSI statement read.

Meanwhile, Australian newspaper, The Age, is reporting that the British organization Airport Operators Association, which represents 72 airports, has written to British Transport Secretary Geoff Hoon saying that the increase, coming as it does during a recession, will threaten the survival of some airports.

The airports association told The Age it predicts that one in 10 routes will disappear this year and that many airports will sustain heavy losses. “Over the past year, more than 40 routes from leading airports have been abandoned in response to a fall in bookings. The number of passengers using Stansted fell by almost 20 percent in May, compared with the same month last year, as airlines concentrated on the main hubs of Heathrow and Gatwick. The number of passengers using those two has fallen by 6.5 percent and 3.9 percent respectively, year on year.”


UK departure tax "short-sighted" and could shut down many British airports
Photo by Nelson Alcantara

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