TakeVAT target Aviation tax at Heathrow


10:44 am - February 13th 2011

by Newswire    


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Activists from a newly formed protest group were chased by police around Heathrow airport yesterday in an attempt to highlight the fact that the aviation industry pays no VAT.

Modelling themselves on UKuncut, protesters from TakeVAT ran around Terminal 3 at Heathrow airport ‘confiscating items’ such as luggage trolleys and toilet roll.

They say there is no VAT paid on airline tickets, the purchase of planes or on spare parts for aircraft.

They say the aviation industry also pays no VAT on fuel or aircraft, avoiding £9 billion in VAT every year.

A coordinated protest took place at Leeds / Bradford international airport.

A spokesperson said:

It is simply unfair that aviation pays no VAT. Why should one of the dirtiest and noisiest industries in the world get away scot-free when ordinary people are charged VAT on basic necessities like toilet rolls?

TakeVAT website // Twitter account

More pictures by Jonathan Warren here.

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Reader comments


I’m sure all the passengers immediately thought – yes! – please charge us 20% more…

… there are several obstacles to taxing aviation fuel. First, it is probable that unilateral moves by the UK to impose duty on this category of fuel would be counterproductive, and contrary to EU law. Second, it is likely that even an EU-wide agreement on taxing this fuel would have a limited effect. Imposing duty on all flights – not just ‘domestic’ ones within the EU – would pose the threat of “tankering”: carriers filling their aircraft as full as possible whenever they landed outside the EU to avoid paying tax, increasing the level of aviation emissions. Finally, although there have been some moves to reach an international agreement on taxing fuel, progress has been very slow.

In its white paper on aviation published in December 2003, the Government argued that bringing aviation within the EU emissions trading scheme represented the most effective response to the growth in emissions. This remains the current position [at October2009] , and in December 2007 Member States agreed that aviation would come into the scheme from 2012. Taxing aviation fuel, House of Commons Library

“It is simply unfair that aviation pays no VAT. Why should one of the dirtiest and noisiest industries in the world get away scot-free when ordinary people are charged VAT on basic necessities like toilet rolls?”

Oooh, I can answer that question.

“VAT Air travel, like all UK public transport modes is zero-rated for VAT.”

http://www.bata.uk.com/Web/Sustainability.aspx

So you will, of course, be campaigning for VAT on train and bus transport as well?

Why are they campaigning for higher taxes on some items, rather than a reduction of tax on the majority of items?

I know which would offer the biggest benefit to the average consumer.

Companies don’t pay VAT you numpties. The general public do. Any company registered for VAT is basically acting as a unpaid tax collector for the government. The company collects the tax from it’s customers and forwards it back up the chain of companies until it eventually reaches the government.

@4
The answer to that is that they are not protesters by any sensible definition of the word. They are statists, who want more state, more interference, more laws. They want more money from the state for them. They want a bit of the huge pork barrelling edifice built by Gordon Brown.

“VAT Air travel, like all UK public transport modes is zero-rated for VAT.”

Since when was air travel public transport?

“Since when was air travel public transport?”

Lessee…..you travel in a vehilce owned by someone else, to a pre arranged schedule, and travel is open to any member of the public willing to pay the price.

Other forms of public transport.

Bus:

you travel in a vehilce owned by someone else, to a pre arranged schedule, and travel is open to any member of the public willing to pay the price.

Train:

you travel in a vehilce owned by someone else, to a pre arranged schedule, and travel is open to any member of the public willing to pay the price.

Yes, I think it’s clear that air travel is public transport, don’t you?

Confiscated items? Theft?

Well they are either very brave, or very stupid doing this in a building covered by anti-terror laws where the police are armed and have authority to shoot first and ask later.

An official tweet from this group said air travel is only for the rich. What about the millions of workers struggling to make ends meet, for whom an annual holiday is their only reward for enduring mundane underpaid jobs most likely under threat from the cuts?

To me simply seems like an offshoot of a successful group by some idealogical students with little comprehension of VAT.

Fine I get the whole VAT avoidance by basing abroad (play, Tesco etc), but air travel?

There is also the whole “yeah this is an injustice” mentality being fueled on twitter, again with little comprehension.

The Air industry pays no VAT on parts or planes. This one is easy, even for a non tax expert like myself.

We have treaties with many countries so if we pay tax in that country, we dont have to also pay HMRC VAT. So when you buy something from abroad, and return to the UK from your holiday you’d be happy to also queue to pay the VAT on that item as well?

All of the commercial aviation sector is based outside the UK. So this clears up the no VAT on parts or Planes. Before anyone starts, BAE no longer produce stuff themselves, but build as part of Airbus/IADS who are based in EU. Boeing the US….

As has been said, bus & train journeys are also exempt like so many food items, utilities are like some others, reduced rate. So TakeVAT is effectively saying everyone should pay full VAT on everything?

You cant start such an argument, then be selective about the fine detail.

Sorry but

Hold on, you want the passengers to pay VAT on their tickets? 20% more? Seriously?

@9

From yesterday twitter post:

http://twitter.com/#!/TakeVAT/status/36455807621136384
@TakeVAT Take VAT
VAT has risen on everything you buy to 20%, hittting the poorest hardest. But Heathrow pays NO VAT! And flying is a rich habit. #takevat

The last sentence is my issue. Even if referring to business travellers, not EVERY business traveller does so because they enjoy it or get paid well to do it. Such a sweeping statement wont work beyond student circles.

I take it none them have or ever will fly then.

The great Warren Buffett said the best thing we could have done with the Wright brothers is to have shot them.

“If there had been a capitalist down there, the guy would have shot down Wilbur, one small step for mankind, and one huge step for capitalism.”

The amazing thing about the airline industry is if we globally aggregate it since its inception, despite being massively subsidised the industry has never generated a profit and it has been going for getting on for a century. The industry is a huge bottomless pit that just swallows capital with dubious benefit. Most goods still travel by sea, rail and road just like they always did. On the plus side folks enjoy a cheap foreign holiday, which is a benefit to, er, themselves.

“The amazing thing about the airline industry is if we globally aggregate it since its inception, despite being massively subsidised the industry has never generated a profit and it has been going for getting on for a century. The industry is a huge bottomless pit that just swallows capital with dubious benefit. On the plus side folks enjoy a cheap foreign holiday, which is a benefit to, er, themselves.”

Yup, ain’t it great, a huge consumer surplus!

All those people benefitting from the capitalist pig dogs trying but failing to make a profit….

Yes, I think it’s clear that air travel is public transport, don’t you?

No, in this case the ‘public’ bit refers to the owners, not how the system works.

Whats more intriguing is why the airline industry doesn’t pay VAT on parts or fuel even though car owners and bus companies do.

Though, given this is EU regulation Tim W – you should be opposing it, right?

Not sure on fuel, but I’ve explained vat on parts. Plane makers dont have UK subsidiaries

“No, in this case the ‘public’ bit refers to the owners, not how the system works. ”

Erm, trains are privately owned so by your definition trains are private transport. Buses are privatelyowned so buses are private transport.

So, no, sorry, that definition won’t fly.

“Open to the public” is more often used as the definition of private transport. So a private car is not public transport, while a bus, train or plane is.

As to it being an EU idea that VAT should be put on air tickets, yes, that is indeed a proposal that has been put forward recebntly. So much so that I’ve actually mused publicly as to whether Take VAT are simply an astroturf group. FoE Europe, just as one example, does get more than 50% of its funds from hte EU….

The 2 Eds:

“Hold on, you want the passengers to pay VAT on their tickets? 20% more? Seriously?”

Yes!

@17

Astroturf group? New term for me.

Sunny,

Whats more intriguing is why the airline industry doesn’t pay VAT on parts or fuel even though car owners and bus companies do.

Though, given this is EU regulation Tim W – you should be opposing it, right?

Not just the EU but something older: the Chicago Convention.

Liberals have been complaining that VAT has gone up but maybe they want people to pay more VAT on things they don’t approve of?

What a ridiculous protest. Who would vote for putting up air fares by 20%?

[21]:
“Liberals have been complaining that VAT has gone up but maybe they want people to pay more VAT on things they don’t approve of?”

In my opinion that’s quite reasonable. Although (legal issues aside) we’re just talking about paying VAT in the first place.

[22]:
“What a ridiculous protest. Who would vote for putting up air fares by 20%?”

I would. But I would then use the money raised to reduce some other tax, like further increasing the income tax threshold.

There are other taxes on air travel though …. wouldn’t introducing VAT lead to these being reduced? A little unfair otherwise?

@23 & 24

Any increases would be on top of current taxation. Governments dont like lowering taxes, or simply moving them around.

I think people will get a real awakening to this come the Budget next month when Mr Osborne jacks up taxes quite significantly. And trust me he will have to.

Not decided yet whether Ken Clarke has pre-warned us all to avoid fallout later on, or if as I suspect many Tories are questioning George Osborne’s stance on cutting fast & deep due to their bulging email and post boxes from angry constituents.

@25
Perhaps the protesters aren’t aware that taves are already levied on air travel.

WhatNext?!:
“There are other taxes on air travel though …. wouldn’t introducing VAT lead to these being reduced? A little unfair otherwise?”

Air travel is still not taxed much though.

@ukcuts:
“Any increases would be on top of current taxation. Governments dont like lowering taxes, or simply moving them around.”

Well then they should start liking it. Anyway, as it is, the income tax threshold will be going up by £1,000 in April, and corporation tax will be cut, so it’s just not true to say that any increases would be on top of taxation in general.

@ 25. @ukcuts

The chatter is he might cut taxes next month rather than raising them, Mr Ukcuts. In Treasury speak I would think it is more likely to be revenue neutral. Lots of shuffling around but too modest to make much difference. They are trying understandably to shift the tax burden away from income and investment onto consumption. The median earner needs a tax cut as their incomes are being squeezed. Although, I doubt whether the government are ambitious enough to give them one. Too much deficit phobia.

All of the commercial aviation sector is based outside the UK. So this clears up the no VAT on parts or Planes. Before anyone starts, BAE no longer produce stuff themselves, but build as part of Airbus/IADS who are based in EU.

Which is completely irrelevant, for at least two reasons:

1) VAT is EU-wide, so the fact that Airbus’s final assembly is in France doesn’t make it avoidable.

2) If you buy an iPad in the UK, it’s designed in the US and built in China, but you still have to pay excise duty and VAT on it.

The reason aircraft, aircraft parts and aviation fuel are exempted from VAT and duty is solely because the Chicago Convention of 1944 says that they should be, and all EU states are signed up to the Chicago Convention. Therefore, every EU country’s VAT laws incorporate the Chicago Convention provisions as specific exemptions for VAT that would otherwise be payable.

Air travel is still not taxed much though.

Fag-packet-ish-ly, I reckon APD averages about 10% of the average fare paid for the relevant distance and travel class bands.

Yes, but APD is *supposed* to be a Pigou tax on emissions: at which rates it’s about right perhaps too high.

@27
Sadly taxation doesn’t work fairly this way. The taxes you mention may be being cut, but national insurance is going up instead.

@28
EU countries may operate vat (US call it sales tax, varies by state) but each country is a different territory still. So if you pay vat on goods in say Germany, that money goes to their treasury not ours. Hmrc can’t also claim tax on that due to the open market tax policies of the eu.

Or have I misunderstood what you many by eu wide vat?

@29
Hopefully you’re right. Personally I don’t see a positive.or neutral outcome.

EU countries may operate vat (US call it sales tax, varies by state) but each country is a different territory still. So if you pay vat on goods in say Germany, that money goes to their treasury not ours

No, that’s not how VAT works. If a company based in one EU country sells goods or services to another company based in another EU country, then VAT is payable in the country where the *buyer* is based.

If I own a factory in Germany making motorbikes, you’re a motorbike dealer, and you pay me EUR5,000 for a motorbike, then you’re liable to pay 5000 x 20% x 0.84 = GBP1051 to HMRC. You can then offset that amount against the VAT you owe from selling motorbikes, just as you could if you bought them from a UK supplier. Meanwhile, I need to declare the sale to my local German tax office, who’ll register it as a zero-rated transaction, and won’t charge me anything.

So if the VAT exemption for aircraft and air fares were lifted, it’d work the same way. EasyJet would buy an A320 for EUR40 million, and would then be liable to pay 40m * 20% * 0.84 = GBP6.7 million to HMRC, which they could then offset against the VAT paid by their passengers. Airbus would have to declare the sale to the French tax authorities, who’d register it as a zero-rated transaction and wouldn’t charge them anything.

What about if EasyJet bought a Boeing? Well, it’d be the same net result. Sales taxes in the US are only levied on goods sold direct to the consumer, so there’d be no tax or rebate to worry about – but whenever you import any goods into the EU that aren’t exempt, then VAT is charged on them. So again, EasyJet would have to pay 20% of the purchase price to HMRC, and offset it against VAT paid by their passengers.

“but whenever you import any goods into the EU that aren’t exempt, then VAT is charged on them. So again, EasyJet would have to pay 20% of the purchase price to HMRC, and offset it against VAT paid by their passengers.”

Which is one of the reasons we don’t charge VAT on planes. Every tiome it goes in and out…..is this an import or not?

But a business that pays VAT on inputs charges it on output … the result is that for the business there is likely to be no effect – only higher prices on the output. The business will reclaim the VAT it pays on the supplies it obtains and charge VAT to its customers – and it then accounts for the difference to HMRC (which usually means that it is acting as a tax collector of VAT for the revenue).

This has to be the silliest campaign against ‘tax avoidance’ yet – all of the campaigns show a shocking lack of understanding of either of law or of the economics of tax, but this one is just plain ignorant.

Tim: that’s a red herring. Norbert Dentressangle don’t get charged VAT every time they stick a truck on the Euroshuttle, but they do have to pay VAT on each new truck when they buy it from Volvo and register it in whichever country they want to base it. The same would be easy to work for planes.

Evan: in economics terms, what you’re claiming is that the tax incidence of VAT falls *solely* on consumers. This is empirically unlikely – normally the burden of taxes is split between consumers (who pay more), suppliers (who’re squeezed on prices) and shareholders (who make less profit).

The whole purpose of VAT is the taxation of output and the reclaiming of the tax raised on supplies as inputs. It is accounted for completely separately from the accounts of most businesses. It is not included in turnover calculations and so is completely irrelevant for profit calculations.

It is a revenue neutral tax for almost all businesses. It is intended to be so. In the UK it replaced sales taxes when we joined the EU.

It is accounted for completely separately from the accounts of most businesses. It is not included in turnover calculations and so is completely irrelevant for profit calculations.

This is where accountancy and real life diverge.

There’s a difference to me, as a consumer, between something which costs four quid and something which costs five quid.

If something which previously cost four quid (because it was VAT-exempt) now costs five quid (because it isn’t), then this will negatively affect my willingness to buy it.

So while the retailer that sells it won’t see a direct effect on margins (because the extra pound is excluded from their accounts, as you say), they’ll *sell less of them, because they cost more*.

This is pretty basic.

Matt @23, you say you would like to put up air fares by 20% and use the money for some worthy causes. What gives you the right to go dipping in to people’s pockets like that? You’d charge people an extra £100 for a flight to America or India? I don’t think that the people who want to fly would agree. Why make it harder for people to get around?
You get threads on Liberal conspiracy every time that Boris Johnson puts bus and tube fares up. Transport should be as cheap as possible.

Damon, are you trolling, or troubled?

We get grumpy when Boris puts up the Tube fares because everyone who works in London has to pay them or lose their job (of course, the poorest people in London pay bus fares instead, which is why Boris’s even larger rises in bus fares are even more outrageous).

Nobody *has* to take a holiday to the US or India. And I say that as a UK citizen living outside the UK who works as a freelancer and pays for my own travel when I return home – while I strongly value the ability to travel home (relatively) cheaply, it’s obviously a pleasant luxury rather than something I *need* to do.

23…”In my opinion that’s quite reasonable”

If you think tax should be used to correct behaviour that is.

What would you tax that you don’t like then?

John B –

I agree – that’s why a campaign to impose VAT on something that is currently exempt or zero rated has an impact on the consumer but not on the business itself.

Yes, it will raise revenue for the taxman, and it may reduce demand (although in the context of flights, I imagine it will have little real impact) for the product or service, but it has no direct effect on the business that is VAT registered – with the consequence that it makes no sense to argue that being exempt from VAT or having your product or service zero rated is a matter of tax avoidance … it is simply an absurd proposition based on an ignorance of what VAT is.

“If you think tax should be used to correct behaviour that is.

What would you tax that you don’t like then?”

Of course we tax things we don’t approve of in order to reduce consumption of them – tobacco and alchohol are the most obvious examples, but the fuel duty increases justified on the basis of climate change and the differential duties imposed on cars depending on emissions data are other examples.

We even use the tax system to encourage behaviour we approve of – see the differential tax treatment of certain types of saving for example – or the zero rating of certain goods (some foods, childrens’ clothes etc).

The whole problem with the debate on so-called ‘unacceptable avoidance’ is that most avoidance is based on using the rules that we impose to promote activity we approve of to maximise the benefit that can be obtained from that rule. So the trusts lawyers (and I am one of them, I admit) will advise clients how to ensure that assets and income are distributed amongst a family in a tax efficient way – and the company tax advisors will ensure that a company manages its affairs in a manner that ensures that every cost that can be claimed before tax is claimed and that where the company trades in a number of jurisdictions, the advantages inherent in the tax treaties between those nations are used to their maximum advantage.

The answer, in my view, is simpler taxation regimes, not in more complicated rules.

it may reduce demand (although in the context of flights, I imagine it will have little real impact) for the product or service, but it has no direct effect on the business that is VAT registered

? – unless I’m selling stuff below cost price, then a fall in demand => a fall in sales => a fall in profits!

most avoidance is based on using the rules that we impose to promote activity we approve of to maximise the benefit that can be obtained from that rule

On the other hand, this is absolutely spot on.

John B @40 – you bring in the ”Troll” word very easily there. Are different views not allowed or something? Putting a hundred quid on a flight to India for someone’s political idological preferences, is a rotten miserable idea and has to be justified.
Not just nodded through as if people accepted the ”Plane Stupid” agenda as uncontroversial and righteous.
I know several Indian people in the UK, for whom flying home for family visits at least once a year is not a luxury, but an essential part of life.

“it may reduce demand (although in the context of flights, I imagine it will have little real impact) for the product or service, but it has no direct effect on the business that is VAT registered

? – unless I’m selling stuff below cost price, then a fall in demand => a fall in sales => a fall in profits!”

This is a marvellously simplistic view of the economics of a business. Yes, there may be a reduce in demand if the price of a product increases – but that is not the whole story. Of course, the profits on the whole are made on the margins between the costs and the sales achieved by the business.

The manner in which VAT is accounted for means that it is not money that is available to the business – it is tax – and you charge customers VAT and the business reduces the amount of tax it recovers from its customers by the amount of VAT that it pays on the supplies it purchases. The tax is never the money of the business and so it is irrelevant for calculating turnover, profits and corporation or other taxes that are paid on those figures,

The point that I am making about VAT is that for legitimate business, VAT on the whole has no impact on the caclulation of turnover and profits. It is simply irrelevant.

I know several Indian people in the UK, for whom flying home for family visits at least once a year is not a luxury, but an essential part of life.

As implied above, I’m a Pom in Australia. Flying home is enjoyable, but it’s not an essential part of life. I’m flying home this year, because it’s my sister’s wedding. I’m not intending to fly home next year. A friend of mine here is Indonesian; she lived here for eight years before her first trip home, because she couldn’t afford the money and the time off.

The point that I am making about VAT is that for legitimate business, VAT on the whole has no impact on the caclulation of turnover and profits. It is simply irrelevant.

And I admit that from an accounting point of view, you’re correct.

But if a business goes overnight from VAT-exempt to VAT-ed, and at exactly the same time, all its costs go from VAT-exempt to VAT-ed, then the net result will be that *on the difference between costs and sales* (or “profit”, roughly), in real life it will have to pay an extra 20% tax, which will affect its profit margins

Or, if you’re judging the business solely by the books and ignoring tax, its sales will mysteriously fall, which will be due to the fact that its stuff costs people more to buy, which will also make its total profits mysteriously fall.

I think the confusion arises because people forget the clue in the name ‘ value added ‘ End-consumers are the ones who pay VAT just like they are supposed to because it is a tax on consumption. Just like all taxes with the exception of a LVT there will be some degree of deadweight loss for everyone involved the supply chain before the end-consumer pays the tax.

I am sorry, but I understood the point of this campaign was to point to the VAT less status of flights as a form of tax avoidance – it isn’t. For the reasons that I have explained it is simply irrelevant … the airline won’t be paying this tax … in its accounts it won’t exist … the airline will recover the VAT it pays by reducing the amount it pays on account of the VAT it collects from its customers.

This is not tax avoidance … it is simply how VAT works. For the airline, whether VAT is charged to it and by it is a matter of supreme indifference as far as the airlines tax liabilities are concerned.

John B @47

As implied above, I’m a Pom in Australia. Flying home is enjoyable, but it’s not an essential part of life. I’m flying home this year, because it’s my sister’s wedding. I’m not intending to fly home next year.

And so what exactly? You are seeming to suggest (witout saying it) that there is some consensus that people shouldn’t be able to travel around the world easily. Or if they insist on doing so, that it should be expensive.
Long haul flying is still in it’s infancy in some ways. But it is becoming (for example) totally the norm, for people of Caribbean origin in the UK, to have been to the Caribbean several times. And those who who have never been, might be looked apon as being a bit unworldly. The more the world integrates and people migrate, the more they will need to be able to go back home for visits, or go and visit friends and relatives who live overseas.

If people have a problem with air travel they should put that at the head of their arguments, rather than using the ‘T’ word at the drop of a hat.

Damon, the price of air travel should neither be expensive or cheap. What the price should do is contain all the externalities. Traveling by air is not personal to you as you pollute the commons for everyone else. Therefore, the price should reflect the cost that you impose on others.

@51

The government already tax air travel, just like road tax, with an environmental element.

Naturally this is just a name and cashcow, and yet another form of taxation that doesnt go towards what it should.

Richard W, there is something in your argument that hasn’t been explained. As it is, it’s sounding like a bit of a moral argument. Why should it be a ”user pays” situation for who picks up the bill for dealing with any harmful effects of air travel? You could pay for this in any number of ways.
It could come out of general taxation, a rise in NI contributions, a general sales tax, investment in renewable energy, switching to nuclear power …. anything.

Air travel is one of the very last things you would want to restrict in my opinion, as you hurt a lot of humans directly, without getting a good enough return for the pain inflicted.

‘@ 52

I know air travel is already taxed. I have no idea if it is currently optimal and I am not arguing that it should be higher. What I am saying is the principal that those who use the skies should pay for using the skies is sound.

@ 53

Damon, that is a rather silly argument. Let me ask you. Who should pay the duty on spirits, spirit drinkers or diet coke drinkers? Who should pay fuel duty, people who buy fuel or people who buy coconuts?

I don’t believe in restricting air travel, I don’t care what people choose to do with their money and time. However, the cost should reflect all the externalities and then the people who value it the most will use it and those who do not value it will do something else. If as you imply you value it so highly then cost would not deter you because you would give up something else to consume air travel. If you did not give up something else well you clearly did not value it as highly as you thought.

@Evan Price. The government taxes tobacoo not so much because “we” don’t approve of it but more as a means of raising revneue.

The government hasen’t said that “we” don’t approve of alcohol. They put a tax on it in the misguided belief that making it more expensive will stop people with drink problems consuming it to excess.

@54

But you’re missing the point Air travel IS taxed to account for environmental damage. Have seen a figure somewhere about the environmental cost being £80/tonne yet the taxation brings in equivalent to approx £200+/tonne.

But then the question is why this money isnt given to the whole world rather than the country the ticket was bought in.

I don’t agree Richard W. Mainly just to be awkward because this is LC, where editorialy, anti-avaition causes and protests are pushed quite shamelessly.
I use that last word, because opposition to that view is seen as trolling and can even be deleted.

You can put heavy duties on spirits, or you can have low duties on spirits (and cigarettes). There is no natural place where a country puts their taxes.
In some countries, petrol is 20p a litre or some low price like that, because the government doesn’t tax fuel (because people are poor).

It is my opinion that easy air travel is essential to world civilisation. And being such an unequal world, as far as real earnings are concerned, high air fares hurt the poor most.
I want foriegn workers in The Gulf to be able to go home regularly and see their families, as for them not to be able to afford it would be inhumane.
I want African people working for the minimum wage in London to be able to make regular visits to Nigeria to see the family they have left behind and maintain contacts.
If fares are high, only the rich will be able to afford to fly.

It’s just a point of view. ”Plane Stupid” have another.

I should have said principle rather than principal.

Damon, Civilisation predates air travel by quite a margin. I have no desire to stop people traveling and used to fly about fifty times a year. However, air travel does have negative externalities and in the UK is taxed using Pigovian Taxes to counter and pay for those externalities. There is absolutely nothing unfair about it, what would be unfair is expecting everyone to pay from general taxation.
http://en.wikipedia.org/wiki/Pigovian_tax

I’m not a supporter of pigovian taxes then. There is something not adding up here.
It’s this thing about ”negative externalities”. Everything we do has them. I have the idea that the anti-aviation movement are seizing on air travel in a symbolic manner, as an example of one of the ”gross excesses” of modern life.

Putting VAT on airline tickets as a way of curbing demand would cost a plane load of passengers flying long haul with tickets now costing £500, tens of thousands of pounds extra per flight. An Airbus A380 can carry up to 853 passengers, so @ £100 extra each, that’s £85,300 for one flight. A ridiculous over the top amount of money surely?

What were these people protesting about again? (It’s pretty dumb IMO).

[32 – ukcuts]:
“Sadly taxation doesn’t work fairly this way. The taxes you mention may be being cut, but national insurance is going up instead.”

But how does this disprove what I was saying, that any increases would not need to be on top of taxation in general?

[39 – damon]:
“Matt @23, you say you would like to put up air fares by 20% and use the money for some worthy causes. What gives you the right to go dipping in to people’s pockets like that? You’d charge people an extra £100 for a flight to America or India? I don’t think that the people who want to fly would agree. Why make it harder for people to get around?”

If I am dipping in to people’s pockets then surely I am doing the same with income tax, national insurance and VAT and in a much bigger way? Don’t you think that you are putting it in a rather unnecessarily emotive way? Anyway, I wasn’t talking about worthy causes as such, I was talking about increasing the income tax threshold, so in fact if I had my way I would be putting money back in people’s pockets, with them then having the option as to what to spend that money on.

And yes, I would charge people that extra £100. And perhaps in many cases they wouldn’t agree, just like many motorists don’t like being charged tax on petrol. I really don’t think that an extra 20% is a big deal though – after all, motorists don’t just pay an extra 20% for VAT, they also pay more than 100% extra in fuel duty (I am aware that there are already taxes on flying, but they’re only small).

Finally, I hardly think that flying is a necessity; flying to India and especially Australia should be a rare thing.

[41 – Dan Factor]:
“If you think tax should be used to correct behaviour that is.”

I wouldn’t say that it’s about correcting behaviour as trying to modify it – trying to get people to drive and fly less, for example.

“What would you tax that you don’t like then?”

Why do you ask? That sounds like you’re just trying to have an argument.

[45 – damon]:
“Putting a hundred quid on a flight to India for someone’s political idological preferences, is a rotten miserable idea and has to be justified.”
“I know several Indian people in the UK, for whom flying home for family visits at least once a year is not a luxury, but an essential part of life.”

I don’t accept that when they chose to move here. In my opinion it is a luxury. It would discourage people from flying as much, which would be good for the environment, and you have to tax people somehow so allowing very low earners to keep more of their income I would consider more important. How about the idea of putting 60 pence on every litre of petrol for someone’s political ideological preferences?

[50 – damon]:
“Long haul flying is still in it’s infancy in some ways.”

I don’t accept that. And I don’t accept that if someone migrates that they need to be able to go back home for visits. It is something that they may want to do, but they don’t need to do so. I don’t have a problem with air travel, just as I don’t have a problem with driving, but that’s not the same as thinking that there’s no limit.

[57 – damon]:
“I want African people working for the minimum wage in London to be able”

You’re happy with them paying income tax on such low earnings?

[58 – Richard W]:
“I have no desire to stop people traveling and used to fly about fifty times a year.”

That’s ridiculous! As far as I’m concerned that just shows how cheap air travel really is.

damon,

Why should it be a ”user pays” situation for who picks up the bill for dealing with any harmful effects of air travel?

Why shouldn’t he? Why should a non-user of air travel pick up the bill?

Matt,

… flying to India and especially Australia should be a rare thing.

Why should it, so long as externalities are paid for?

“However, air travel does have negative externalities and in the UK is taxed using Pigovian Taxes to counter and pay for those externalities. There is absolutely nothing unfair about it, what would be unfair is expecting everyone to pay from general taxation.”

Quite. And yet Pigou Taxes give us the “correct” level of taxation, they’re not an argument for “higher than now” taxation.

And as is pointed out above, APD does pay for those externalities. The Stern Review said it’s $80 ($80, not £80) per tonne CO2. APD is, given the bands it’s calculated in, around or just above this rate.

So, we’re done, finished, aviation is taxed the right amount.

ukliberty

Why shouldn’t he? Why should a non-user of air travel pick up the bill?

User-pays is one way of running things and it might be the best and most efficient.
But if you don’t make the same case for railways (or even health care for that matter) then you should say why. Otherwise you just leave us with assumptions. That air travel needs to be restricted for example. If you think it does you (one) should say so.

I only make this point because editorially, Liberal Conspiracy supports the restriction of air travel and the direct action protests to that end. So people really need to make their own positions clear, otherwise it might be assumed that they take editorial lines on this as given.

damon,

User-pays is one way of running things and it might be the best and most efficient.
But if you don’t make the same case for railways (or even health care for that matter) then you should say why.

But broadly speaking I do think all externalities should be paid for by the user.

Otherwise you just leave us with assumptions. That air travel needs to be restricted for example. If you think it does you (one) should say so.

I think people should be free to travel provided they pay for the cost of the mess they leave behind.

I only make this point because editorially, Liberal Conspiracy supports the restriction of air travel and the direct action protests to that end. So people really need to make their own positions clear, otherwise it might be assumed that they take editorial lines on this as given.

Why assume something not in evidence about a contributor or commenter just because LC has ‘an editorial line’?

[61 – ukliberty]:

“Why should it, so long as externalities are paid for?”

But how exactly do you pay for externalities when you’re talking about environmental damage? Plus what about the noise of the flights? And building over more and more of the countryside to accommodate runways and roads to the airports?

Matt, we set prices on the externalities and these are passed on to the user. We can and do have regulations to limit aircraft noise and incentivise aircraft manufacturers and users to improve the technology.

No that wasn’t my point, my point was that paying money doesn’t automatically deal with the environmental damage. And limiting aircraft noise doesn’t make up for the huge growth in the number of flights over the years. Plus what about air pollution around airports?

Matt,

No that wasn’t my point, my point was that paying money doesn’t automatically deal with the environmental damage.

Of course it doesn’t. It’s an incentive to cause less environmental damage.

And limiting aircraft noise doesn’t make up for the huge growth in the number of flights over the years. Plus what about air pollution around airports?

Regulate pollution levels and incentivise polluters to decrease pollution, measure and re-evaluate over time (see this).

“Of course it doesn’t. It’s an incentive to cause less environmental damage.”

But you said before, in response to me saying that flying to far-flung places should be a rare thing: “Why should it, so long as externalities are paid for?”

I have to admit, I don’t really follow your line of argument here. When you use the word “paid”, are you referring to something other than handing money over?

I am saying that flying to far-flung places should be a rare thing because of the environmental damage. And as you agree, that paying money doesn’t automatically deal with the environmental damage.

Matt, do you think all environmental damage from air travel is permanent? Or do you think that some of it can be cleared up, some will naturally be dealt with by the environment and the rest can be traded-off against positive environment actions (e.g. planting trees)?

Well that’s a changing-the-subject comment!

I shall come back to it later. I shall also have to have a look at the points which you haven’t responded to.

Matt,

Well that’s a changing-the-subject comment!

Just trying to find out if you’re arguing good faith or if you are a loon.

Forgive me, but when someone says something like “my point was that paying money doesn’t automatically deal with the environmental damage” as if someone had suggested it does, gives me cause to wonder.

I can assure you that I am arguing in good faith.

“Forgive me, but when someone says something like “my point was that paying money doesn’t automatically deal with the environmental damage” as if someone had suggested it does, gives me cause to wonder.”

So when I said in response to, “Why should it, so long as externalities are paid for?”, “But how exactly do you pay for externalities when you’re talking about environmental damage?”, why did you reply, “we set prices on the externalities and these are passed on to the user”?

I just don’t follow your argument. It’s like you missed out the bit “when you’re talking about environmental damage”.

Perhaps for clarity you could give me your definition of “externalities” just to make sure that we’re thinking of the same thing.

In addition to my previous post, you didn’t reply to this point:
And limiting aircraft noise doesn’t make up for the huge growth in the number of flights over the years.

“240.7m passengers used British airports in 2007, estimated to rise to 470m by 2030”
http://www.airportwatch.org.uk/news/detail.php?art_id=1478

Regarding air pollution around airports and that document, I’m not about to read through a document more than 100 pages long about airport air quality, but again, slowly reducing the amount of pollution given out by aircraft isn’t going to make up for the huge growth in the number of flights.

And from the above link regarding CO2 emissions, “50% more emissions from aviation expected by 2020, assuming fuel efficiency improves by 50%”.

Paying money does deal with environmental damage: in the following manner.

Whydon’t we like enviro damage? Because it reduces future human utility.

What is our overall aim? To maximise aggregate human utility.

Why do people like flying? Because it increases their utility.

So, wehave a conflict here, between people increasing their utility by flying and their decreasing others’ utility by the pollution from doing so.

If our aim is to maximise utility, then we need some method of making sure that the only flights which take place are those where the gain in utility is greater than the loss of it.

So, we work out what are the costs of that loss in utility through polltuion (this is what Lord Stern did and we get that $80 a tonne CO2 number). We then add this as a tax to flights (APD).

People who do not value their flight more than the damage it will do now do not fly. The only people who do fly are those who value the flight more than the loss of utility to others.

We are now maximising human utility, our aim all along.

This is known as Pigou Taxation. And it applies to all sorts of externalities. People must pay the costs of their actions: not in order to clean up the results of their actions, but to make sure that only those who value the action more than the costs of it undertake that action.


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