Air passengers hit with tax hike

Prime Minister John Key says he is disappointed that Britain will increase passenger duty for air travellers to New Zealand.

The British Government announced overnight that the UK Air Passenger Duty (APD) will increase by 8 percent next April.

That's an increase from 85 pounds (NZ$170) to 92 pounds per passenger coming to New Zealand.

"The APD places a significant burden on New Zealand businesses, on families who travel, and on our tourism industry,'' Mr Key said today.

"The British Government has been reviewing the structure of the APD this year and the New Zealand Government has been talking closely with them about this issue. We made our views on APD clear on several occasions, including during Foreign Minister William Hague's visit here in January, and my own visit to London in April.''

The previous UK government used environmental grounds to justify imposing a higher levy on long-distance flights.

"With the tax for New Zealand-bound passengers set at four or five times the costs of offsetting the carbon emissions produced, this logic is without basis,'' Mr Key said in a statement.

The British Government's announcement maintained this cost difference and ignored the fact that environmental concerns about emissions were being addressed through the European Union's extension of its Emissions Trading Scheme (ETS) to aviation emissions.

"That puts a levy on airlines, meaning there is no justification for an additional duty on air passengers which discriminates on the basis of distance.''

Mr Key said the New Zealand Government had been hopeful that the British Government had been persuaded not to proceed with an increased APD that discriminated unfairly against Australia, New Zealand, the Caribbean, Singapore, South Africa and a few others.

"However, with this latest announcement it is clear that the APD will remain an issue between New Zealand and the UK,'' Mr Key said.

"We will continue to raise this with the UK at every opportunity.''

The amount of APD that passengers have to pay depends upon whether their flight is short or long-haul, with business and first-class travellers having to pay more than those with an economy ticket.

Under the new rates economy-class passengers flying no further than 2000 miles will see their APD rise from 12 pounds  to 13 pounds  per passenger.

Longer flights up to 4000 miles will see an increase from 60 to 65 pounds, flights between 4000 and 6000 miles will rise from 75 to 81 pounds and the tax on economy flights above 6000 miles - such as trips to New Zealand will rise from 85 to 92 pounds.

The APD changes next year will also see it extended to private business jets for the first time.

Airlines are furious with the announcement and have called for the APD to be scrapped.

Willie Walsh, boss of BA parent company International Airlines Group (IAG), said the harm to the economy exceeded the revenue that would be raised.

But a British Treasury spokesman said the aviation sector had to "play its part" in restoring the public finances.

BA said it had planned to take on 800 staff in 2012, but this would now be cut in half, and that the airline would also review plans to bring in an extra Boeing 747.

The tax sparked a moment of unity between rival airlines last month.

Bosses of Easyjet, Ryanair, Virgin Atlantic and IAG signed a joint letter criticising the increase.

The letter called the government's consultation on APD "a sham and a waste of taxpayers' money".


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