New Plan Uses Environmental Impact As Basis Of Reasoning
A controversial new British plan to reduce environmental impact
through the increase of airline taxes for transatlantic flights is
receiving strong opposition by the United States, according to a
letter leaked to the London Daily Telegraph.
The unusual attack -- especially ahead of a visit by President
Bush to Britain next week -- is causing some concerns that Prime
Minister Gordon Brown may need to address in the near term. The US
Embassy’s "deep concerns with the proposal" threaten legal
action against the British Treasury if the planned tax increase --
which could potentially increase taxes added to fares from
£40 to about £100 ($79 to $200 US) per person -- went
The sharp tax increase would net the British government an extra
£520 million annually.
The plans, unveiled last year by Chancellor Alistair Darling,
proposes to change the way flights are taxed by Fall 2009.
Currently passengers pay a fixed tax per flight, but under the new
plans, the Treasury will tax each aircraft instead and airlines
will pass the tax to the customers aboard. The amount paid per
aircraft will vary by distance travelled as aircraft fly into three
distinct taxation zones.
As a result, European flights would have less tax added than
flights to America. Such a situation would give people flying
long-haul a major incentive not to take direct flights but to
change planes in Europe -- a significant disadvantage for British
and American airlines that operate direct flights to the US and
The new tax structure was said to be a measure to reduce
environmental impact of airlines.
When the proposal was announced, Darling said it was to
"encourage more efficient use of planes" so that aviation makes a
"greater contribution in respect of its environmental
The letter from the American Embassy disagreed saying, "The
Treasury's proposal, although cast as an environmental measure,
appears in reality to constitute nothing more than a device for
generating additional 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
The embassy also warned the British Government that such a tax
plan could significantly impact their competitiveness.
"The proposed duty, by raising the overall cost of flying
aircraft to the United Kingdom relative to other destinations, is
likely to diminish the number of flights operating to and from the
United Kingdom," said the April 15 letter.
"This would seem an anomalous result, however, given the focus
in the United Kingdom on, among other things, restoration of the
competitiveness of Heathrow Airport with the opening of Terminal 5
and consideration of a third runway."
The Americans also warned the "proposed duty raises serious
The letter detailed a number of international treaties and
agreements which the new tax would allegedly breach, raising the
threat of international legal action. The embassy also sent the
letter to other European governments.
The issue is made even more sensitive when recent increases in
fuel prices, especially in America, threaten the financial
stability of airlines and travelers bear higher fares for summer
A source close to the discussions said to the Telegraph, "The
whole thing is a total nightmare. The Treasury have made a major
mistake and not thought through the consequences. The Chancellor
will have to sort this out or he will threaten the health of the
airline industry in this country."
A spokesman for the Treasury insisted the proposed tax did
indeed offer environmental benefits and was required to meet
obligations in the global community.
"The per plane tax is intended to ensure the industry makes a
greater contribution towards its environmental costs and to ensure
that the aviation sector continues to contribute fairly and
equitably towards the funding of public services," he said.
"The Government aims to have a fairer duty more in line with the
environmental impacts of flights, including the distance travelled,
and which takes account of any social or economic impacts including
market distortions. We are committed to meeting our international
obligations under the Chicago Convention and the EU-US Open Skies
bilateral agreement and would not propose a measure that we