Simon Calder: How to turn the air tax rise to your advantage
The man who pays his way
Saturday 30 October 2010
On Monday, the tax on flying from Britain rises again. To find out how to work the system so you are effectively paid to stop over in a fascinating city, read on.
From the Chancellor's point of view, Air Passenger Duty (APD) is as perfect as a tax could be. It costs almost nothing to collect, since the airlines are obliged to keep count of passengers starting air journeys in the UK, and then write the appropriate cheque. It is nigh-impossible to evade, though you can avoid it by either of the diametrically opposed strategies of travelling terrestrially, or hiring an executive jet. And around half the people who pay it don't even vote here – they are foreigners who have to stump up to leave Britain.
As revenue-raisers go, APD is in a league of its own, which is why successive chancellors have raised it by up to 1,600 per cent since Ken Clarke invented it in 1995. On Monday, it increases yet again. The fee for boarding a short-haul flight in economy rises from £11 to £12, while tax on a trip of more than 6,000 miles in anything more than basic economy jumps from £110 to £170.
Actually, that last part is not quite accurate. It isn't the trip length that counts, but the distance from London to the capital city of your country of destination. A bonus for Hawaii, 7,000 flying miles away, because the tax is based on how far it is to Washington DC – half the distance. But the Caribbean islands and Bahamas fall the wrong side of the 4,000-mile tax boundary, obliging passengers bound there to pay £75 rather than the £60 that all US-bound travellers pay.
That absurdity is one reason why everyone without the good fortune to be Chancellor – be they passengers, airline executives or environmental activists – believes the structure of APD to be nonsensical. It rewards inefficiency, because if seats are empty, no tax is due. There is no incentive for flying on less-damaging planes. And the holidaymaker who simply wants a bit more legroom on a charter to the Caribbean will pay £30 more tax than a first-class passenger to California.
The travel industry, though, has been protesting too much, too late. In the six months since the election, the chorus of UK airline bosses and tourism ministers from abroad has grown louder, even though there was never a chance that the coalition would scrap the rise. Claims that tourism to the Caribbean will collapse are negated by the sharp rise in flights planned by British Airways: more services from Gatwick to Antigua, Barbados and St Lucia, plus reinstated links to San Juan in Puerto Rico and Cancun on Mexico's Caribbean coast. And the Kenyan tourism minister's anger the £25 tax rise to Nairobi would be more convincing had the country not decided to double its visa fee.
Astute travellers should not sit and grumble about higher taxes: you should get George Osborne to pay for your stopover. Here's how. You plan a passage to India. Turkish Airlines has a good fare from Heathrow via Istanbul to Delhi for £467 in November. This includes £75 in Air Passenger Duty, which is calculated on your first destination, disregarding transit stops. But build in a two-day stop in Istanbul, and the fare falls to £404. The difference in tax is enough to pay for a couple of nights in a hotel in this spellbinding city.
The trick is to choose an airline and a stopover destination where you won't face a barrage of extra taxes. Good examples are Dubai on Emirates en route to Australia, and Air New Zealand via Los Angeles to Auckland – for the latter, the saving will pay for a night at Santa Monica youth hostel, and a drink at one of the hotels by the Pacific that offer free hors d'oeuvre during happy hour. That'll take your mind off taxation.
Airlines and the treasury lose out
Thomas Cook Airlines has some rows aboard its long-haul charter flights with extra "seat pitch". It suits the carrier and tall passengers to have an option to book these for an extra £50 for a flight to, say, Barbados. But it suits the Chancellor even more, because APD jumps by £75. So Thomas Cook has scrapped reservations outbound from the UK, and from May will allocate them arbitrarily at the airport. A loss for airline, a bigger loss for the Treasury.
The other loser: Britain's tourism industry. I don't buy the idea that Americans will be put off from holidaying in the UK by the extra tax it will cost them to leave. But APD is a deterrent to people considering a British stopover en route to somewhere more exotic. You don't pay APD if you are only in transit – or if you break your journey in Paris or Frankfurt rather than London. The tax is delivering passengers to Air France and Lufthansa.
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