Legal Threat to UK "Plane Tax" Plan
The US Embassy in London has attacked the UK government's plan to introduce a new Aviation Duty next year, saying the plan is a revenue-raising measure.
The government hopes to introduce the duty - dubbed the "plane tax" - from November 2009 replace the existing Air Passenger Duty. The plans call for airlines to pay tax based on the aircraft's weight and the distance of flights, rather than paying tax per passenger as they do now.
A three-month consultation into the new tax closed in April, and it has now been revealed that during this time American officials in London launched a stinging attack on the plans in a six-page letter to the Treasury.
In the letter, which has been seen by the Daily Telegraph, the Embassy says the US has "deep concerns over the proposal".
On announcing the launch of the tax, the government said the millions which would be raised from the tax would be used to help lower CO2 emissions.
However, the US Embassy letter said: "The Treasury's proposal, although cast as an environmental measure, appears in reality to constitute nothing more than a device for generating additional revenue from the airline community. There is no linkage between the funds collected from airlines and the mitigation of any environmental impact of airline emissions or any other environmental problem".
The letter continued: "...by raising the overall cost of flying aircraft to the United Kingdom relative to other destinations, [the duty] is likely to diminish the number of flights operating to and from the United Kingdom. This would seem an anomalous result, however, given the focus in the United Kingdom on, among other things, restoration of the competitiveness of Heathrow Airport with the opening of Terminal 5 and consideration of a third runway."
UK Aviation Duty
The UK Aviation Duty plans calls for the amount of tax paid to vary depending upon the aircraft's size, and on how far it has travelled. Flights to the US and other long-haul destinations would be charged more than those from European destinations.
Airlines have said that if the tax change came into force, they would be forced to pass on the extra charges to passengers. Some analysts have predicted that the tax payable on a flight from the UK to the US could double to £100 per person.
Airlines and airports have already recorded their opposed to the plan, saying that in the current climate of rising fuel prices it is added source of uncertainty for the entire industry.
Newcastle International Airport said in April that the plan was effectively "discriminating" against British airlines and airports.
US airlines and airports are particularly sensitive to the issue because they in particular are faced with the fuel price increases.
"Plane Tax" Legal Action
The US Embassy has gone further, saying that the planned tax increases threatens several international legal agreements.
The Embassy said it could threaten the government with legal action on the "plane tax".
It has been reported that the Embassy's letter has caused "serious concerns" among government officials, and that the extent of the opposition could yet lead to a climb-down from the Treasury.
For its part, the Treasury denies that the tax would be illegal.
It also defended the proposals, saying: "The Government aims to have a fairer duty more in line with the environmental impacts of flights, including the distance travelled, and which takes account of any social or economic impacts including market distortions".
"We are committed to meeting our international obligations under the Chicago Convention and the EU-US Open Skies bilateral agreement and would not propose a measure that we considered illegal".
Source - Airport International's Aviation Correspondent
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