As tourism leaders from around the world converged on London last week for the World Travel Market there was widespread condemnation of the changes to the Air Passenger Duty (APD) introduced on the 1st November. More than 100 countries voiced their disapproval of the tax, but the government insisted that they have no intention to listen to any of the criticism, maintaining that the tax is an environmental measure.
With a general election likely in May 2010 the Tories have said that they will scrap the current APD and replace it with a per plane tax. What effect is this likely to have on the industry? In principle, the per plane tax will be fairer but the Tories are unlikely to reduce the overall tax revenue. Depending on the levels set, one consequence could be fewer routes offered by airlines as less efficient routes are dropped.
However, whichever party forms the next government, the taxation of tourism is unlikely to stop with the APD. It’s possible to make a parallel between the travel industry and the wine trade. As Jamie Goode writes in his excellent wine blog, the biggest threat to the wine trade in the UK is the moral panic regarding alcohol that the government is happy to see escalate. The result is that government feels justified in imposing huge duty increases on drink in the knowledge that people will still drink and revenue will rise accordingly.
In much the same way, the current UK government has been happy to portray travel as a fundamentally bad thing. This enables them to justify imposing large tax increases on something the public now see more as a necessity than a luxury. Unfortunately, for the travel industry, its lobbying power is significantly inferior to that of the drinks trade.
As successive governments shy away from raising income tax to cover the rising national debt, sectors are targeted to make up for the shortfall. Unfortunately, travel has been in the cross-hairs for some time in the UK. There’s every chance that the future in the UK will start to resemble the US, where it is hard to make it from the plane to your hire car without incurring several taxes. Airlines have so far borne the brunt of government tax policy, but hotels and car hire companies may be next on the list.
