Azara Blog: UK whacks up Air Passenger Duty

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Date published: 2009/11/15

The BBC says:

The first of two rises in UK airport departure tax has come into effect, adding up to £30 to the cost of flying.

The price of the shortest flights rises by £1, with Air Passenger Duty on business and first class journeys over 6,000 miles up from £80 to £110.

The costs used to be based on either short or long haul flights but is now divided into four distance bands.

The government has cited environmental reasons for the rise but airlines are worried about business in a recession.

Further rises will come into force in November next year.

A spokesman for the Treasury said: "The government maintains that air travel should pay its fair share in tax.

"APD is an important contributor to the public finances, while helping the government achieve its environmental goals."

Air travel should indeed "pay its fair share in tax". And air travel should also cover its environmental externalities. Unfortunately the APD is one of the most idiotic mechanisms for achieving either goal. So on the tax front, air tickets should be subject to VAT, to put it on a level playing field with (almost) every other consumption of goods in the EU. And on the environmental front airplane fuel should be subject to a carbon tax. The APD is a completely idiotic subsitute on both fronts because passengers flying with efficient airlines pay the same as those flying with inefficient airlines. Of course the APD does contribute a lot of tax to the government, and it will mean that fewer people fly, hence there will be less damage to the environment. But there is little rhyme or reason to the current government approach, given that it penalises good airlines and rewards bad airlines. Further, train passengers are hugely subsidised, so in effect pay a negative tax, in particular a negative carbon tax. It seems that only drivers and airplane passengers are supposed to cover the costs of their journey. This is what happens when the academic middle class run the world.

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