John Key to Attempt Departure Tax Negotiation

January 17, 2011 International TaxationNew Zealand Taxation

Long haul, 8 Sept. 2008The New Zealand Prime Minister will soon conduct talks with the UK Foreign Minister, in hopes of addressing the Britain’s high airport departure tax.

On January 16th the Prime Minister of New Zealand John Key indicated that he will attempt to persuade British Foreign Minister William Hague to reconsider the UK’s upcoming airport departure tax. The Prime Minister believes that the tax could be especially harmful to New Zealand’s tourism industry, and even undercut the economic impact of the upcoming Rugby World Cup.

The British Foreign Minister is expected to arrive in New Zealand on January 20th, along with the Defense Secretary Liam Fox. The visit will last two days and is expected to consist of several ceremonial visits, along with numerous political discussions. John Key has stated that the issues of the departure tax and immigration between the UK and New Zealand will be the primary topics.

The rates for the Air Passenger Duty (APD) were raised by the UK Government in November 2010, with a potential for further increases int he short- and medium-term. The tax levies different rates on passengers, based on their travel distance and seat class. New Zealand is classified as a long-haul destination, and subsequently attracts the highest levy. Currently, the APD will be charged at GBP 85 (approx. NZD 176) per person flying in economy class, and GBP 110 (approx. NZD 227) for higher classes.

Commenting on the increase in November 2010 Tourism Industry Association Chief Executive Tim Cossar stated that the UK Government originally that the tax was intended as an environmental tax, although no movement has been made to use the revenues for eco-projects. Also in November the Foreign Affairs minister Murray McCully indicated that potential talks with the UK Minister could have some positive results, saying, “…it’s fair to say that Foreign Secretary William Hague in particular has made it clear that he understands the points that we have made – that this is a very punitive tax as far as more distant nations like New Zealand are concerned.”

Photo by PhillipC