While the Conservative leadership race dominates the news in the UK, the European Union is continuing to regulate as usual. At a recent European Council, the Netherlands proposed an EU departure tax, which would add a levy of €7 (£6.25) to every flight departing from an airport inside of a member state. The tax has the support of France, Belgium, Luxembourg, Sweden and Finland, but could be opposed by Malta and Cyprus. Both islands would be hurt by higher taxes on air travel, since travelling from, say, Stockholm to Malta by boat is probably not the most convenient of options.
French Finance Commissioner Pierre Moscovici has argued that before such a tax can even be countenanced, the EU needs to remove the right for countries to veto any EU-wide tax initiatives. Instead, he proposes a system of qualified-majority voting, which would fundamentally strengthen the EU’s ability to push through significant legislative change in the face of opposition. Such changes are afoot, and make the likelihood of the Netherlands proposed tax becoming law in the future.
Having a passenger tax isn’t a new idea. In fact, Air Passenger Duty already exists in the UK, Italy, Germany, France, Sweden and Austria. In the UK, the reduced rate for air travel in the lowest class available is £13 (standard rate at £26). Flights over 2,000 miles have a reduced rate of £78 and a standard rate of £172. This is up from 2007, when the tax was doubled from £5 to £10 for European destinations. There have subsequent increases, even though research from Oxford University suggests that high-income groups would rather absorb the tax than change their travel habits, showing that the Air Passenger Duty is clearly regressive, hitting the poorest hardest.
Such regression is exacerbated by the fact that the EU departure tax would be applied uniformly to all citizens of all countries across the Union. The disparity in wealth (or GDP per capita) of Germany or Luxembourg compared to the likes of Bulgaria or Moldova is dramatic. And yet under this tax a venture capitalist in Frankfurt and a construction worker in Sofia would pay the same levy whenever they boarded a plane.
Over recent decades affordable flying has democratised the act of travelling. Locations that were previously unattainable for lower middle class and low-income households are now viable tourist destinations. This has benefited both the tourists themselves and the places they travel to, helping to regenerate calcified towns and cities.
But what about the environment? As ever, technology is leading the way to a brighter, greener future, with the aviation industry developing new and better technologies to clean up air travel. Airbus’ new A321XLR. for example, has 30% less kerosene consumption per passenger, while adding 30% more range than the currently used A321neo. That should be to nobody’s surprise: both the aviation sector and airlines do not have any incentive to use more kerosene than they have to.
The European Union is going down the road of abstinence instead of innovation. The United Kingdom should go in the opposite direction, and trust engineers and scientists to solve the transportation and environmental challenges of the future, while maintaining affordable travel for all. The first step towards doing that post-Brexit would be to abolish the regressive Air Passenger Duty.
This article was first published by CapX.
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