The United Kingdom has long been known for a rather brutal tax known as the Airline Passenger Duty ("APD") assessed on departing passengers. The fee is variable based on the distance of the flight and the cabin of service, with premium cabin passengers paying twice as much as folks riding down the back and the cost for travel to the USA at £120 (~$180 these days) up front. The tax is, depending on who you ask, designed to offset the environmental impact of all the flights or to simply discourage people from flying.
Apparently, however, rather than meeting either of those goals in Northern Ireland is has a different effect: It drives traffic across the border to the south. Departures from Dublin incur minimal taxes (~$5 these days) and shuttle service between Belfast and Dublin is cheap and readily available. The net effect is that passengers are simply skipping out on flights from Belfast and the British Treasury is getting none of the cash.
That’s changing now as apparently someone finally realized that it is possible to tax a product out of existence. The government has chosen to slash the long-haul APD for flights out of Belfast. Currently the only service affected is a daily flight between Newark and Belfast on Continental Airlines which was apparently in danger of disappearing. That service will remain, in part thanks to this change,
…maintaining Northern Ireland’s vital economic air link to North America, and Northern Ireland will gain a fresh opportunity to develop other long-haul routes to the rest of the world.
The APD for long-haul flights will be reduced to match the short-haul rates. That’s a difference of £48 for economy class passengers and £96 for folks up front (passengers will be charged £12 or £24).
No word yet on whether Continental will be letting customers save some money thanks to this tax cut or if they’ll be raising their fares to compensate for the cut in the taxes and pocketing the difference for themselves. I’m betting on the latter.
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“it is possible to tax a product out of existence.”
Um, no, what you’re seeing is the result of inconsistent tax policy across borders and arbitrage. If both sides of the Irish border had the same taxes THEN you could point to the drop in passenger numbers as the result of taxation.
On my last trip to London, I flew into London and out of BRU. Since I wanted to see BRU anyway, the savings in APD was used to buy the o/w Chunnel ticket London-Brussels, food/drink in Brussels, hotel night & transportation & some nice chocolates (Neuman’s) for my wife.
Agreed, Chemist. When it is cheaper to do something else then other options show up that make the taxed product disappear. The UK seems to think that only land borders expose the arbitrage discrepancies but enough folks are using the train and other options to get around the costs and kill the taxed product.
I do not believe that the APD is being used for carbon offsets, which they should. I read an article somewhere recently that the funds were being used to prop up the UK finances which got hammered in the fall out from bailing out their banks (cant put my hands on it, sorry). There may be additional costs for carbon offsets coming.