Higher UK Departure Tax Proposed

November 26, 2008 International TaxationNew Zealand Taxation  No comments

Those flying from the United Kingdom to New Zealand will see a tax increase of as much as ?90 or $220NZD soon.

In the 2008 pre-budget report released on the 24th of November indicates that Air Passenger Duty (APD) is set to be raised by the British Government. As it stands at them moment the APD is ?10 for European destinations and ?40 for other destinations, in lower class, while all other classes faced taxes of ?20 and ?80 for European and other destinations, respectfully.

The new regime is set to be priced under the scheme of carbon offsetting, namely by charging in distance bands, with higher distances receiving higher penalties. New Zealand and Australia are both in the highest and subsequently most expensive band. The tax increase is also set to come in two stages with an increase in November 2009 and a subsequent one in October 2010.

Band A destinations, cover those within 3219 miles of London. These are charged ?11 and ?22, price increasing with class and to be raised to ?12 and ?24 in 2010. Band B destinations cover those between 3220 and 6437 miles of London and are priced ?45 and ?90 based on class, increasing to ?60 and ?120 in 2010. Band C destinations lie between 6438 and 9656 miles, costing ?50 and ?100, increasing to ?75 and ?150. The highest band, Band D is set to be priced at ?55 and ?110, which will increase to ?85 and ?170.
The distances have been calculated as the difference between the capital city of the destination country and London.
In effect, a traveler destined for New Zealand or Australia will be charged $154 or $308 New Zealand Dollars, at today’s exchange rate. This will increase to $238 and $476 in 2010.
For the purposes of the APD, if a flight features only one class and the seating of that class is longer 40 inches, it will be considered as an “other” not “lower” class.

New Zealand Prime Minister John Key was quoted on the 26th of November as having said that he has personally talked to British Prime Minister Gordon Brown about what kind of effect this will have on tourism. The United Kingdom has been reported as being the second largest tourist group in New Zealand. Prime Minister John Key, who is also the New Zealand Tourism Minister, has said that this tax could have the effect of making New Zealand less competitive as a destination.

The Australian Tourism Export Council (ATEC) has accused the new APD as a money raising scheme disguised under the pretense of curbing environmental impact caused by long-distance flights. The ATEC has also issued a statement saying that they believed that the new tax was a means by which the UK and the rest of Europe are shielding themselves from competition in tourism. A study done at Oxford University in response to the last APD rise indicated that such actions might not necessarily have any justifiable affects in lowering emissions, due to higher-class passengers choosing to absorb the cost as opposed to flying less or closer.

The exact effect of the APD is yet unknown as there is little contemporary empirical data upon which to base any conclusions or predictions. As the APD is a tax towards airlines, it is unclear whether this increase will be passed onto the end consumer.

The full APD document and destination bands can be seen here