The principles of tax policy

Written evidence submitted by the British Air Transport Association (BATA)

1. The British Air Transport Association (BATA) welcomes the opportunity to submit evidence to the inquiry entitled ‘The Fundamental Principles of Tax Policy’, being undertaken by the House of Commons Treasury Select Committee.

2. BATA is the trade body for UK registered airlines. Our ten members cover all sectors of the airline industry – including freight, charter, low fare, regional operations and full service. In 2009, BATA members directly employed over 71,000 people, operated two thirds of the UK commercial aircraft fleet and were responsible for some 80% of UK airline output, carrying 81 million passengers and 1 million tonnes of freight [1] .

3. We appreciate that aviation taxation is of only peripheral concern to this inquiry. Nevertheless, we do wish to bring to the Committee’s attention a number of issues which we believe are of relevance.

4. The Coalition Government went ahead with the dramatic increase of up to 50% in Air Passenger Duty (APD) – the tax on flying from UK airports – which came into effect from 1st November this year and was first announced by the previous Administration in November 2008 [2] . After one of the most disastrous years on record for aviation, this was a kick in the undercarriage that the industry could ill afford. Aviation already more than pays for the environmental costs of the 6% of total UK CO2 emissions it produces through the imposition of APD and Britain now suffers from the heaviest tax on flying in the world with as much as £170 levied on a single ticket. Indeed, the Office for Budget Responsibility calculate that the Treasury now makes more money from the tax on flying than it does from the Bank Levy or from duties on alcoholic spirits, and will raise over £15 billion from APD in the next five years [3] .  This level of taxation is especially damaging to regional airports where routes have been lost over the last few years to our near continental competitors who impose little or no similar tax on flying. Instead, our near European competitors are actively building new runways to accommodate new traffic and the anticipated growth in tourism from the Far East.

5. The Prime Minister has publicly stated an aspiration to grow the numbers of tourists visiting the UK and thus help stimulate the economy, most recently in January 2011 [4] . Yet the cost of visas and APD totals £612 for a family of four visiting from China on a round trip flying economy to the UK. By comparison, it costs that same Chinese family £212 to visit Paris. In 2008, France received 688,000 Chinese tourists compared to just 108,000 visiting the UK [5] . With such a disparity in tax on tourism between the UK and our continental competitors, the challenge of increasing our tourist numbers is made all the more difficult.

6. In its recent Budget, the Irish Government reduced their tax on flying on the grounds that the quantum of the tax was damaging to tourism [6] . It is notable that a Government facing arguably a far more serious fiscal crisis than the UK has taken the decision to reduce its tax on flying in order to stimulate the economy.

7. BATA would be pleased to provide oral evidence to expand on the points made in this submission.

January 2011


[1] CAA ‘UK Airline Statistics: 2009 – Annual’, tables 1.6, 1.14 and 1.11.2

[2] HMT Treasury ‘Pre-Budget Report 2008’, chapter 7, pages 138 &139, table 7.2 and paragraphs 7.55 to 7.58

[3] Office for Budget Responsibility ‘Economic and Fiscal Outlook – November 2010’, page 91, table 4.6

[4] Prime Minister’s Speech on Economic Growth, 6 th January, published on www.number10.gov.uk

[5] Visit Britain ‘Welcome to Britain: Improving the Visa Application Process’, March 2010, page 2, paragraph 2 at http://www.visitbritain.org/Images/Visas%20final%20Mar10_tcm139-186987.pdf

[6] Irish Department of Finance, ‘Financial Statement’, 7 December 2010 at http://www.budget.gov.ie/budgets/2011/FinancialStatement.aspx