Corporate business lobby top supporter of planned tax cuts for aviation industry
VESTED INTEREST GROUPS in favour of a £150m tax cut for the airlines industry dominated the latest consultation on the current Air Passenger Duty (APD) proposals.
Analysis of the 22 public submissions to the finance committee on the proposed tax cut identified a strong theme of airlines industry groups lobbying for a cut in their taxes - strongly outweighing a handful of submissions criticising the proposals.
Multi-national corporations calling for a tax cut include Airlines for America, Easyjet, Flybe, Ryanair and Virgin Atlantic. Over half the submissions had directly links to the aviation sector. A majority of respondents to the Scottish Government’s previous public consultation had opposed the plans.
The evidence coincides with concerns from the committee, led by SNP MSP Bruce Crawford, that there remains a lack of financial evidence for plan to cut the tax.
When questioned on the issue, finance minister Derek Mackay admitted that “We haven't commissioned, to the best of my knowledge, any independent research of our own.” Instead the government’s case has been based on information provided by the aviation sector.
— Michael Gray (@GrayInGlasgow) March 3, 2017
Crawford told the minister there was a “growing consensus” with “wide-ranging criticism” that there is a lack of financial and environmental evidence on the consequences of slashing APD.
Craig Dalzell, author of a post-Brexit updated report on the tax plans, is highly sceptical of a tax cut - and warns that it would leave a gap in public finances: “It is perhaps no surprise that those most interested in the proposal to cut and abolish the Air Departure Tax are those whose industry is mostly closely linked to it but the response from this group is quite revealing and should serve as a warning.
“Of the 22 submissions published, only two groups - Common Weal and the RSPB - came out as strongly against cutting the tax and 12 of the submissions are from groups which are directly involved with airlines and airports (all of which are in favour of the tax cut).
“Common Weal's submission pointed out significant shortcomings in the economic analysis presented by the Scottish government. The measure of this policy must look beyond a nebulous count of ‘jobs created’ or ‘GDP growth’. It is vital that the Scottish Government look closely at this evidence and widen their consultation process to other sectors otherwise it may appear as if this policy will become one written by the airport lobby, for the airport lobby.”
Issues raised by Dalzell include the concern that incentives for regional and international air travel creates a disincentive for domestic tourism - so called ’staycations’ - which could reduce overall tourism revenue.
“The airlines have simply omitted crucial information which is inconvenient for them and have glossed over things like the fact that even they accept £50m of this tax cut will be entirely wasted.” Robin McAlpine
This factor was not included in pro-tax cut research carried out by the airlines industry.
Director of Common Weal Robin McAlpine added: “It's not that there has been no independent assessment of the case airline lobbyists are making. We've done a detailed assessment and unfortunately the case just doesn't stand up.
“The airlines have simply omitted crucial information which is inconvenient for them and have glossed over things like the fact that even they accept £50m of this tax cut will be entirely wasted. It's also of real concern that the economic impact of this proposal has not been tested against the economic impact that could achieved if this money was spent on something else. Now is the time for a substantial rethink on the part of government.”
Following the election, the APD tax cut pledge appeared to be in jeopardy as a majority in parliament opposed the plan. However, the Tories have since carried out a policy U-turn, and may now support the plans if brought forward for a vote.
The Air Departure Tax Bill will confirm the effective devolution of the tax from Westminster to Holyrood.
Picture courtesy of Shai Barzilay
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