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Freight customers reject proposed aviation tax

02 May 2008

Own Goal on UK industry. In a formal submission to the Treasury the Freight Transport Association has rejected Government proposals for the introduction of a duty on individual air flights which would, for the first time, impose a tax on air freight. FTA says that such a tax would add unnecessary costs on to UK air freight services, some of which would switch to continental airports and then truck goods in and out of the UK, adding to UK roads congestion. FTA says that the tax would reduce the competitiveness of, and the demand for UK exports, particularly for high value, hi-tech goods which are sensitive to increased relative prices. The Treasury intends to introduce a replacement tax for Air Passenger Duty. The new Aviation Duty is proposed to make a charge per take-off from a UK airport and would be based on maximum take-off weight and distance to be travelled. Other EU countries do not impose such a tax. The new Duty is intended to raise revenue rather than generate any environmental benefits, which, if obtained, would merely be a bonus. FTA's Head of Global Supply Chain Policy, Christopher Snelling said, 'A plan to increase the costs of air freighting goods out of the UK is an absolute own goal by the UK Government. All that such a duty will achieve is to increase costs to shippers and air operators for direct UK air services, encouraging them to transfer goods by road to continental airports and then fly them from there. In the longer run it will mean that shippers will seek alternative, cheaper, options for air freight by using continental bases for their operations. Such a policy will fail to raise much revenue for the Government but will result in lost business within the UK. 'Air freight is only used for 0.5 per cent of UK freight movements. However, due to the nature of the products involved, it represents 25 per cent of the UK's international goods movements. It is valuable or perishable goods that move by air. 'Economic research suggests that the proposed tax will significantly impact on competitiveness, to the substantial disbenefit of UK exports with a movement of business to Schiphol or Paris where a more benign tax regime applies. 'FTA says that the Treasury must reconsider the wisdom of this proposal and the inevitable damage which its implementation would do to UK industry for a very limited benefit to the UK exchequer.'

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