Scotland drops plan to slash air departure tax
The Scottish government has made a u-turn on plans to cut the rate of tax on air travel with the introduction of an air departure tax (ADT) in Scotland, which would replace UK wide air passenger duty (APD)
8 May 2019
The original proposal would have seen a 50% reduction on the UK rate, but the Scottish government has dropped the plans in response to growing concerns about the impact of climate change.
The policy, which was a key plank of the majority SNP party’s last election manifesto, has already been considerably delayed. It was as originally slated to come into effect from 1 April 2018.
As well as halving the rate, the Scottish government said it intended to abolish the tax completely by the end of the parliamentary session in 2021, or ‘when resources allow’.
However, in June 2018 the Scottish government said the introduction of the replacement tax would be deferred by a year until the issues raised in relation to the Highlands and Islands exemption had been resolved. This exemption, for air travel by passengers from remote island communities where population levels are sparse but there is heavy reliance on air services, exists within APD.
Last month, Kate Forbes, minister for public finance and digital economy, gave a Parliamentary written answer on the issue in which she said the exemption question, which potentially amounted to an EU state aid issue, still remain unresolved and stated that ‘this, taken together with the continued uncertainty around Brexit, means that that we have to defer the introduction ADT beyond April 2020.’
Now finance minister Derek Mackay has made clear ADT will not go ahead in its current form, saying the proposals were ‘no longer compatible’ with Scotland’s climate change targets.
Analysis by the Scottish Green Party suggested halving air duty rates would increase CO2 emissions by 60,000 tonnes, and there were indications that the government was about to face a challenge on the tax in parliament.
The Committee on Climate Change last week recommended that Scotland could achieve net-zero greenhouse gas emissions by 2045, with ministers then confirming the new target would be incorporated into the climate change bill, which recently completed stage one in its journey through parliament.
Mackay said: ‘All parts of government and society have a contribution to make to meeting this challenge - and reducing ADT is no longer compatible with more ambitious climate targets.’
Roseanna Cunningham, environment and climate change secretary, said: ‘Following the First Minister’s declaration of a climate emergency last week, and the recommendations from the UK Committee on Climate Change, we have moved quickly to increase Scotland’s emissions reduction targets – which will now be the most stringent in the world. We are reviewing a range of policies across government to ensure that we can meet those targets.’
John Cullinane, CIOT tax policy director, said: ‘Now that ministers have used today’s statement to refocus their policy priorities, the next objective must be to find a solution to the state aid issues preventing the tax from being implemented and on agreeing the detailed rules under which ADT will operate.
‘The Scottish government’s plans for ADT – regardless of the rates ultimately proposed – have been hampered by a lack of detail over how the tax will operate. Basic questions – such as who will pay what, when they will pay it and who is exempt from the tax –all require answering before the tax is in a position to take off.
‘With this information lacking, it has been difficult to say with any certainty what impact the tax would have on the government’s objectives of improving connectivity, promoting economic growth and now, meeting its climate change targets. This hampers the ability of MSPs to properly scrutinise the detail behind the legislation.’