Dominic O’Connell
We've made some changes
to The Sunday Times
MINISTERS have flown into another business tax row after the US government made a blistering attack on a new £2.5 billion aviation duty, questioning its green credentials and claiming that it broke international law.
The extraordinary criticism was made in an official diplomatic note sent to the Foreign Office by the American embassy in London last month.
It said the new charge, proposed in this year’s budget as a replacement for air-passenger duty, “raises significant policy and legal issues” and asks whether it can be justified when the government plans a third runway at Heathrow.
It is understood John Byerly, deputy assistant secretary for transportation and America’s top aviation negotiator, met Treasury officials last week to press home the argument.
The row with the Americans – and British Airways, which is also opposed to the tax – is the latest in a succession of business tax debacles to hit Labour.
Entrepreneurs were incensed by changes (later partly rescinded) to the capital-gains-tax regime, while the City raged against a crackdown on wealthy nondomiciled taxpayers.
Meanwhile multinationals are threatening to quit Britain over proposals on the taxation of foreign earnings, with The Sunday Times revealing last week how a delegation from some of the world’s biggest companies visited Downing Street to confront Gordon Brown and Alistair Darling on the issue.
All this comes on top of Labour’s other fiscal nightmare, the fall-out from the scrapping of the 10p income-tax band.
The new flight levy, which the Treasury says will help reduce greenhouse-gas emissions, is proposed as a replacement for air passenger duty (APD), which has been in place for more than a decade. APD was controversially doubled last year, with passengers paying up to £80 for a one-way trip, depending on the length of the flight and class of travel.
The Treasury wants to change the basis of the duty, moving it from individual passengers to a per-plane basis. This will raise
The American diplomatic note said the switch contravenes the 1944 Chicago Convention, the treaty that governs most of international aviation. It claimed it was also in breach of the open-skies deal hammered out last year between Europe and America.
The Americans also query the basis of the duty, saying the green claims are farfetched. “The Treasury’s proposal, although cast as an environmental measure, appears in reality to constitute nothing more than a device for generating additional revenue from the airline community,” says the note.
The duty was likely to reduce the number of flights from Britain. “This would seem an anomalous result, however, given the focus in the UK on, among other things, restoration of the competitiveness of Heathrow airport with the opening of terminal 5 and the consideration of a third runway.”
While BA and other long-haul airlines are opposed to the duty, budget airlines such as Ryanair and Easyjet support it.
American government sources said Washington could bring a case against the UK at the International Civil Aviation Organisation, the watchdog for world aviation, or under the disputes procedure of last year’s EU-US open-skies agreement.
“The government is in a cleft stick, caught between the Americans and the long-haul airlines on one side and the budget airlines and the green lobby on the other,” said one executive.
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The 'polluter pays' principle is basic justice. Taxing 'per plane' rather than 'per passenger' is simple common sense (you wouldn't tax a car per passenger, would you?)
I suggest that America puts its own house in order before trying to dictate to other countries how we manage our taxes.
Mike Wright, Nuneaton,
America is right, Good Luck.
Nick Knight, Laytown, Ireland
"Tax the rich" and "Tax the polluters" are both irrelevant and based on the politics of envy. Taxing 'per plane' violates the Chicago convention and the law of unintended consequences applies. The USA will probably retalliate where it hurts, hopefully by doubling the import duty on Minis!
Pedro, Stratford,
It would be interesting to see how UK air transportation taxes and charges compare with other EU countries.
John
john, Camberley, UK
I love Britain, I love the British, and I love being in Britain. I have vacation time coming up, and. I thought I had only one problem: the scary exchange rate. I am teetering on the fence this very day, and news of additional taxes like this make me teeter in a western direction. Sorry mates! :(
Barry, La Jolla, USA
Have to say the Yanks are right on this occasion although it is a bitter pill to swallow. The planned tthird runway and a green tax are just not sitting side by side. What the meddlars in the treasury should have done years ago was completely reorganised tha tax system, fairness, simplicity is right
C Darken, Nantwich, UK
I support the US objections. It's a farce for the Govt to claim to want to reduce emissions from aircraft - how does a tax do that, whilst at the same time calling for a third runway at Heathrow to boost aircraft movements at LHR to prevent the domination of Schiphol or CDG airports as Eurohubs.
David O'Sullivan, Crawley, UK
A 'green' tax ? Don't make me laugh - this benighted government couldn't care less about 'green' - all they care about is our money to waste. The UK needs a regime change, and it needs it now.
Chris, London,
For a true reduction in greenhouse gases, the British Government might like to apply a surtax to all public transportation, not just that by aircraft. If applied properly, fewer people would be able to afford public transportation, the newly obsolete buses, trains, and planes can be sold to China.
Menno Aartsen, Fredericksburg, VA, USA
Time to enter into a formal political arrangement with the United States - withdraw from the EU and join NAFTA as a first step towards political integration.
Arnold Ward, Weybridge, Surrey, UK
Come on over, David, right thinking people like you are always welcome.
David, Hollywood, FL, USA
Well ... consider the source.
US airlines are teetering on the brink of collapse (as witness the latest merger news), and their currency is nosediving. Another tax disadvantage for their airlines is not in their interest, hence the protest. Let 'em bring their case and we'll see about its legality
Golodh, London, UK
Labour are anti business and anti personal travel they make me sick but some idiots voted for them at the last election, certainly was not me.
Pete, Yorkshire,
More runways, more flights, increased tax revenue per plane. The chancellor has spotted a nice little earner.
michael clarke, kensington, uk
APD & its successor never had anything at all to do with "green". The logic of it was to discourage people flying by taxing them - & therefore that half empty planes were greener than full ones. And as with all transport taxes, costs born by business are just passed on, driving inflation up.
George Edwards, Beijing, China
We must not allow the rich to escape paying tax on long-haul flying. The majority of the population cannot afford to take long haul flights on a regular basis. It would be immoral for those who are affluent enough to fly long haul to be exempt their fair share of taxation.
keith Kondakor, Nuneaton,
Congratulations to the Americans for taking the government to task. If the British government were serious about green policies there are a lot of other things they could do to show good faith. This was another way to grab money for the taxman. At the same time public services are declining.
Colin, Shaftesbury, UK
How long before the US needs to introduce a similar tax? The US, like the UK, has a huge balance of payments deficit and needs all the taxation it can get to help reduce its national debt.
Paul, Coventry,
"The new flight levy, which the Treasury says will help reduce greenhouse-gas emissions....."
There is nothing green about Labour, they just need to tax, tax, tax, tax and tax more to feed their gross spending waste.
Labour has ruined this country and, thankfully, they are on their way out!
Jon, Preston, England
much as i hate to admit a tax that the airlines can't agree on and the americans think unfair sounds like a good reason to support it.until the airlines pay duty on fuel which requires international
agreement we have to find ways to raise the equivalent tax.
roger, bridport,
The Americans are quite right. Green taxation is simply a good ploy for raising revenue. The danger is that long haul flights will switch from Heathrow to the European mainland, leaving Britain marooned. Another one of Labour's "death wish" policies.
Dwight Vandryver, Scholar Green, Cheshire, UK
When we take to the streets, something I feel that will happen this summer over fuel duty, newly created air travel tax will pale into the background.
We Brit's have had enough and if only America would open its borders to us, we'd migrate in droves.
The end is nigh for Parliament.
David Downes, Chester, UK