UK switches environmental levy from passengers to flights; freighters, private jets enter tax net

London: A change in tax patterns, announced by UK's chancellor of the exchequer in the latest Comprehensive Spending Review, will see aircraft rather than passengers incur an environmental levy. The change in the levy, from passengers to aircraft, is designed to encourage the aviation industry to reduce carbon emissions.

According to the proposal, air passenger duty will be replaced from November 2009 with a scheme that charges flights instead of individuals. The new measure is designed to encourage airlines to reduce the number of half-empty flights and improve the ratio between emissions and passengers.

The proposal will also tax freight aircraft and private jets for the first time. Industry experts point out that about 40 per cent of flights are not covered by passenger tax. These include freighters, private jets and passengers who transfer through British airports.

It is expected that the duty will be levied according to aircraft type, so that older aircraft pay a heavier tax. It is likely that the duty will also be linked directly to the distance flown, so that aircraft flying further pay more.

Currently, all flights within the European Union incur the same £10 tax for economy passengers and £20 for business class. All flights outside the EU invite a flat £40 levy on economy passengers and £80 on business class, irrespective of distance travelled. For many within the aviation industry, this form of taxation hardly provides any incentive for changes to be brought about in the operating patterns of airlines.

According to industry sources, taxing individual passengers raises £2.4 billion a year, and a move to the new system of taxation is expected to raise £520 million more. The proposals have received a near unanimous welcome from various watchdog organisations that felt it was good news for the environment.