Tour operators launch challenge against Brown's air tax

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13 April 2012

Leading tour operators have launched a legal challenge to the Government's Air Passenger Duty (APD) airport departure tax.

If successful, the judicial review could mean the complete withdrawal of APD, which Chancellor Gordon Brown doubled at the beginning of this month.

And a successful outcome of the legal action by the Federation of Tour Operators (FTO) could leave the Government open to claims by airlines and their customers for the repayment of more than £2 billion that has been collected since 2004.

The decision to double APD from February 1 means passengers now have to pay £10 for economy class fights to Europe, £20 for business and first class flights to Europe and £40 for economy and £80 for business and first class long-haul flights.

The FTO is arguing that as a signatory to the 1944 Chicago Convention on International Civil Aviation, incorporated into EU law in 2004, the UK Government is not entitled to impose dues or charges on aircraft solely for the right of transit over, or exit/entry from or into the UK from a fellow state.

The FTO said charges were only permitted if they were cost-based in relation to the provision of a service, such as use of airports or air navigation services.

It added that APD was not levied for any such service and was simply a tax which raised revenue for general Government spending. The FTO argued that as a result APD was in contravention of Article 15 of the Chicago Convention, has been illegal under EU law at least since 2004 and should be withdrawn with immediate effect.

Secondly, the FTO argued that there has been a breach of the Human Rights Act - and in particular Article 1 of the first protocol of the European Convention on Human Rights - in that the unsatisfactory manner in which APD has been introduced interfered with the legitimate property rights of tour operators, depriving them of income to which they were legitimately entitled.

The FTO added its legal challenge had been triggered by the way the doubling of APD had been introduced following the Chancellor's announcement in December last year.

The federation said this had "proved to be disproportionately unfair to tour operators which, unlike airlines, are largely precluded by law from passing on surcharges to customers who have already booked".

The FTO was also unhappy that the APD increase applied to people who had already booked holidays before February 1 but were liable for the rise if they travelled on or after that date.

FTO director general Andrew Cooper said: "This substantial legal action has been launched with great reluctance. Tour operators absorbing £50 million of retrospective taxation however is simply not an option.

"APD - which since its introduction has raised some £12 billion - is a general tax, and not one which is used to support transport or environmental initiatives. It emphatically is not an effective environmental measure.

"Indeed as a tax levied on passenger numbers not aircraft, its effects are perverse in that it penalises environmentally-friendly airlines with high load factors, and rewards those with half empty flights."

He went on: "In terms of climate change, our legal action on APD should not be misunderstood. We are acutely aware of the importance of aviation meeting its environmental responsibilities.

"This is not best achieved through passenger levies or new fuel taxes but, in place of these, through aviation joining the EU emissions trading scheme at the earliest opportunity and at the appropriate levels."

A Treasury spokesman said: "The Government is confident that APD is entirely legal and will robustly defend any challenge in the courts."

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