Call for clarity on status of Holyrood air tax devolution

The CIOT was responding to a Treasury consultation on the future of aviation tax that has proposed reducing the amount of APD paid on domestic flights¹. 

The Scottish Government had previously supported a similar approach to the tax, but reversed this position in 2019, arguing it was incompatible with its climate objectives².

In contrast, Scottish Ministers have now pledged to look at the possibility of increasing the tax once it has been devolved to Holyrood and replaced by Air Departure Tax³. 

The Institute has called for clarification from the UK and Scottish Governments on how they plan to resolve the issues that have prevented APD from being devolved to the Scottish Parliament, despite it being legislated for in 2017⁴. 

Neither have set out in any detail how they plan to resolve this impasse, leaving the timing of the tax’s devolution uncertain.

In its written submission to the UK Treasury consultation on aviation tax reform, the CIOT has also expressed concern that the proposal to cut APD on domestic flights is inconsistent with the UK government’s plans to achieve net zero by 2050.

It has made a number of suggestions to the UK Government for ensuring that the tax better aligns with wider climate targets (see footnote below)⁵.

John Cullinane, CIOT Director of Public Policy, said:

“We need clarity from the UK and Scottish governments about how they plan to resolve the issues that have prevented Air Passenger Duty from being devolved to the Scottish Parliament.

“This is particularly important because it comes at a time when the UK government is actively considering cutting the tax to boost domestic connectivity and the Scottish Government is proposing the opposite.

“Greater clarity will help to give those who will be responsible for collecting and administering the tax more time to prepare for its introduction and give taxpayers confidence in the commitment of both governments to see devolution of the tax through to its completion.

“Otherwise, we run the risk of being left with continued uncertainty, which is unhelpful to the overall performance and credibility of the devolved taxes”.

Notes:

1.  Read the CIOT’s response to the consultation here.

2.  The 2016 SNP manifesto for the Scottish Parliament elections stated: “When the power to do so is devolved, we will reduce the overall burden of APD by 50 per cent, with the reduction beginning in April 2018 and delivered in full by the end of the next Parliament. Air Passenger Duty will be abolished entirely when resources allow”.

3.  Details on the Scottish Government’s policy towards Air Passenger Duty/Air Departure Tax can be found on the Scottish Government’s website here.

4.  Plans to devolve Air Passenger Duty were agreed as a result of the 2014 Smith Commission. They were legislated for by the Scottish Parliament in 2017 but put on hold in 2018 due to issues relating to a tax exemption on flights departing the Highlands and Islands.

5.  The CIOT has recommended that the government:

• Link the tax to the development of green fuels, which have been identified as an area of action in the UK Government’s Ten Point Plan for a Green Industrial Revolution
• Publish a climate change tax policy ‘roadmap’, with the aim of ensuring tax policy changes can be assessed against the government’s 10-point plan
• Further explore alternative ways of improving regional connectivity, such as investment in rail and links to other forms of transport. In its response, the CIOT said that it was concerned over a lack of evidence in the consultation to show that reducing APD would have a positive effect on regional connectivity
• Target discounts and exemptions on routes where alternative modes of transport are unavailable or unviable to protect remote communities, such as the current Public Service Obligations (PSOs) for flights in the Scottish Highlands and Islands, rather than introduce blanket discounts