Airlines urge government to cut passenger tax

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The government is being urged to scrap air passenger duty in order to encourage tourism. Airline lobbyists pointed at the example of Ireland which has cut tax to just three euros per passenger and plans to scrap it altogether by 2014.

Ireland is already something of the Wild West of the EU, where companies flee to escape more stringent tax regimes. It is always a useful example for companies though, when they want to complain about their tax burden.

Britain currently has the highest rate of air tax anywhere in the world, with air passenger duty costing between £13 and £94 per flight depending on the destination, more for business and first-class passengers. The high rates do not seem to have had a marked impact on air traffic, with Heathrow constantly complaining about the need to expand, and the budget airlines proliferating over the last two decades.

Profit margins are down though, especially at the smaller carriers. Steve Hoy, the chief commercial officer at BMI Regional, told the Telegraph that a tax cut following the Irish model would be beneficial. "This recent tax break highlights that the Irish constituency has recognised the negative impact that the duty has on core industry, tourism and airlines," he claimed. "We’re disappointed that UK air travel continues to be subjected to such a considerable levy and urge the UK government to follow suit."

The problem is that such a tax break, while perfectly aligned with the Conservative inclination to make life easier for industry, would fly in the face of their vague promises about the environment, and the rather firmer pledges of their Liberal Democrat coalition partners.

In the short term, long-haul passengers may find it economical to take a budget flight to Dublin and travel onwards tax-free from Ireland. That has already been the case with Northern Ireland travellers to the USA who find it cheaper to fly from the Republic.

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