Update on Air Departure Tax in Scotland
On 12 January 2017, SCC met with the Cabinet Secretary for Finance and the Constitution, Derek Mackay MSP to discuss the Scottish Government’s progress with the devolution of Air Passenger Duty and its pledge to reduce the burden of this tax by 50%.
Prior to Christmas 2016, the Scottish Government announced that the replacement tax in Scotland upon devolution in April 2018 would be known as the Air Departure Tax and legislation has been published in the Scottish Parliament to enable the creation of this replacement tax.
Air Departure Tax (Scotland) Bill
The Air Departure Tax (Scotland) Bill was introduced to the Scottish Parliament on 19 December 2016. It is an enabling bill and it deals with the mechanics of setting up and administering the Scottish replacement for Air Passenger Duty. The basic structure will be similar to the existing UK tax. The bill will give the Scottish Government the power to set the rates, bands and exemptions of the new tax through secondary legislation. This will require to be agreed by the Scottish Parliament through the budgetary process.
The timetable for the bill is expected to follow the following format:
- Stage 1 – Consideration of the bill by the Finance and Constitution Committee and agreement of the general principles of the bill by the Scottish Parliament – by the end of April 2017
- Stage 2 – Amendment of the bill – May 2017
- Stage 3 – Passing of the bill by the Scottish Parliament – June 2017
The lead committee for the Bill in the Scottish Parliament is the Finance and Constitution Committee and it issued its call for evidence on 13 January 2017, with a closing date of 10 February 2017. Scottish Chambers of Commerce is preparing a formal response to this consultation in line with the agreed position of the SCC network on this issue and we will be in touch with you shortly with further details.
How much will the new Air Departure Tax be?
The Scottish Government has not announced its plans for the rates of the new tax other than to say that it intends to reduce the burden of the tax by 50% by the end of the current Parliament (2021), with the elimination of the tax ‘when resources allow’. The SCC network has previously called for a straight across the board reduction of this tax by 50% across all bands and this has received broad support from across the aviation industry.
The Scottish Conservatives, however, have indicated their preference that the new tax keeps short haul rates the same but makes significant reductions to long haul flights. This position matters because the Scottish Government will have to do a deal with the Conservatives to get its plans to cut APD through the Scottish Parliament, as all other parties are opposed to any air tax reduction.
Most airports and airlines are opposed to singling out long haul flights to benefit from a tax cut. This is because only around 10% of Edinburgh and Glasgow Airport’s passengers are flying long haul and none of the other airports offer long haul flights. In addition, those airlines such as Ryanair and Easyjet which have expressed an interest in expanding Scottish services following an Air Departure Tax cut only serve short haul destinations.
Despite this, the Cabinet Secretary has indicated to us that anticipates that tax cuts are likely to be targeted rather than across the board, so there is much lobbying still to do on this.
When will we know the rates and bands of the new tax?
Since the Air Departure Tax (Scotland) Bill will not deal with tax rates or bands, this legislation will be in place before the rates are known. The earliest point that the Scottish Government could set new rates is August 2017 and the latest point would be the Scottish Budget, likely to take place in mid-December 2017. The Cabinet Secretary tells us that he will seek to hammer out a deal on rates and bands with the Scottish Conservatives as early as possible and announce the details prior to the Scottish Budget if at all possible.
If you have any questions about Air Departure Duty in Scotland, please contact Garry Clark on 0141 204 8337, 07795 158137 or at firstname.lastname@example.org