Should charities be made exempt from Air Passenger Duty?
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Version 0 of 1. From 1 May 2015, children under 12 will be exempt from Air Passenger Duty (APD). Under changes announced in the latest budget, the exemption will extend to 16-year-olds from March 2016. So should other exemptions be made? It’s a question that the UK voluntary sector may well ask itself. Charities pay millions of pounds every year in APD, with international aid and disaster relief organisations being particularly hard hit. Such an exemption would be “reasonable”, says Calors Vogeler, executive secretary for members relations at the UN-backed World Tourism Organisation. “There is a very valid argument to support people who have to travel for reasons that imply helping other human beings around the world”, he argues. The UK is one of only five such countries to levy a similar tax in Europe. Moreover, critics of the tax note that the APD is set at more than double than the equivalent in Germany, the next highest. The tax, which was initially introduced in 1994 to mitigate air travel’s carbon impacts, is distance linked. The cost per passenger currently ranges from £13 for a journey of less than 200 miles to £97 for a trip exceeding 6,000 miles. The operational costs for charities with large international travel requirements are self-evident. UK-based travel management company Key Travel, for instance, has calculated that its charity clients paid £4.4m in APD charges in the 2012-2013 financial year. One particular humanitarian charity faced a tax bill of over £260,000. No fan of the APD as it is, the travel industry is quick to lend its support to the idea of a charity exemption. “The NGO community would undoubtedly benefit from seeing the tax reduced for flights from the UK”, says Stephen D’Alfonso, head of public affair at ABTA, the UK’s largest travel association. Whether the APD has resulted in a reduction in travel by NGO workers into or out of the UK is difficult to pinpoint. Certainly, flight arrivals in general into the UK have largely “flat-lined” over recent years, according to John Kester, head of tourism trends at the World Tourism Organisation. If charity workers need to visit the UK or need to be based there, then APD is probably not material, he argues. “If it [a flight to or from the UK] is a more discretionary decision, then of course there is price sensitivity”, he adds. He cites anecdotal evidence from the Netherlands, which scrapped a similar aviation tax in 2009 after passengers migrated to German, French and Belgian airports. Denmark and Belgium discontinued passenger duties for similar reasons. Compared to other taxes, however, APD is far from a priority concern for most charities. A recent survey of 31 charities by the Charity Tax Group finds the duty comprises a mere 0.2% of tax payments [PDF]. Employer’s National Insurance Contributions and unrecoverable VAT, in contrast, stand at 54% and 37.5%, respectively. Environmental charities also express concern over the precedent that such an exemption would have. “This isn’t just about charities”, says James Beard, WWF-UK climate & energy policy officer. “It’s about everybody leading by example.” Instead of reforms to the APD, Beard argues that charities would be better focused on securing an “equitable and environmentally robust” emissions regulation scheme for international aviation. As for reducing travel-related costs, WWF maintains that low-carbon alternatives to flying represent a more effective (and more environmentally friendly) option than reductions in aviation taxes. He cites the example of the One in Five Challenge, which sees a dozen organisations (mostly companies) seek to cut flights by one fifth. Since 2009, the initiative has saved each of the participating companies an average of £2m (plus a reduction in their environmental footprint of 3,000 tonnes of carbon dioxide). Others fear that an exemption for charities could usher in more dramatic reforms to the tax. “This is all just an innovative way to weaken the APD and make it more unpopular – the less universal a tax becomes, the more resistance there is from the group which still has to pay it”, says Dr Doug Parr, chief scientist at Greenpeace UK. He goes further, arguing that the proposal to exempt charities represents part of an unscrupulous attempt by the airline industry to “chip away” at APD. “If the industry wins this argument, it will keep lobbying for more exemptions until it reaches its goal of no tax on flights”, he argues. Clearly there is no consensus among the charity sector on the issue. The Charity Tax Group, which counts over 400 non-profit members, acknowledges that there is “certain strength of feeling” among overseas aid charities about APD. But regardless of the potential benefits to NGOs, the ABTA’s D’Alfonso says it is “unlikely” that the UK government would agree to a charity exemption. According to accountancy firm Deloitte, APD generates around £3bn a year for the public coffers. |