UK newspaper reveals contents of US protest letter to the UK government over proposed switch on aviation duty

Thu 12 June 2008 – Following an article in the UK’s Sunday Times on May 11, the Daily Telegraph has published a full transcript of the six-page letter sent on April 15 by the US Embassy to the UK’s Foreign Office. The letter rebuts the claim made by the UK Treasury that the switch from a per-passenger duty to a per-aircraft charge has been proposed on environmental grounds.
A public consultation by the Treasury on the change closed on April 29. It suggested the new duty should be based on aircraft maximum take-off weight (MTOW) and distance travelled (divided into three international zones), and would for the first time include freight aircraft and possibly even general aviation aircraft over 5.7 tonnes. The move, planned for introduction in November 2009, is expected to net the Treasury an extra £520 million ($1bn) annually.
In terms unusually strong between two such close allies, the letter says: “The Treasury’s proposal, although cast as an environmental measure, appears in reality to constitute nothing more than a device for generating revenue from the airline community.
“There is no linkage between the funds collected from airlines and the mitigation of any environmental impact of airline emissions or any other environmental problem ... Moreover, the Treasury’s proposal does not demonstrate that the new duty would influence airlines to adjust their fleets or their booking practices to achieve higher load factors ... Nor are any data provided to justify the levy based on an assessment of damage from aircraft emissions.”
The letter also warns the Treasury that the “proposed duty raises serious legal concerns” and could breach international treaties and agreements like the Chicago Convention.
The Americans are known to be also unhappy with an ‘eco’ tax being introduced next month by the Dutch government on air travel, and the Daily Telegraph says a copy of the letter has been sent to other European governments.
The US protest could be a fore-runner to an impending bigger battle with the European Union over the proposed introduction of aviation into the Emissions Trading Scheme, which will encompass all airlines, regardless of origin, that fly to EU countries.
However, the incursion of the US into UK taxation affairs has angered the environmental campaign group Aviation Environment Federation.  In a press release headed ‘Memo to US Embassy: get your jumbo jets off our lawns!’, AEF spokesman Jeff Gazzard said: “This unhelpful and totally synthetic intervention in UK tax policies is simply heavy-handed US protectionism trying to preserve the tax-free ‘favoured-nation’ status of civil aviation, which is outdated as we move towards a low-carbon future.
“Taxation at the levels the Treasury are proposing are still some way below what we would like to see: 54 euros ($83) per 1,000 passenger kilometres and 271 euros ($418) per 1,000 freight tonne kilometres, which equates to around £10 billion ($19.5bn) that UK air passengers should be paying to cover all air transport’s externalities. The Government tax take is still around £7 billion ($13.6bn) less than we want to see.
“We are happy that a green aviation tax is being extended to air freight for the first time – many airlines rely on freight carried on passenger flights contributing significantly to profits. Air freighted goods, whether tomatoes or photocopiers, should have the climate change cost of their transportation covered.
“The best the aircraft manufacturing industry and airlines can do is produce efficiency gains of around 1-2% per year – but overall demand-led emissions growth is 4-5% per year. If we are serious about getting to grips with climate change, we have to start controlling and reducing the upwards curve of CO2 emissions from flying by using green taxes as part of clear demand management policies. Our tax levels of £10 billion will get air transport growth in line with these efficiencies by stabilizing emissions around today’s levels.
“This is fair and equitable but it does mean we will have to fly a bit less in the future than forecast.”
AEF contends that the tax proposed by the Treasury is legal and doesn’t contravene the Chicago Convention because it is not a fuel tax levied directly on fuel sales.



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