Posts
Gordon Brown is embroiled in a major diplomatic row with the United States over controversial plans for new airline taxes which could see British families paying £400 extra for transatlantic flights.
An official letter sent by the US Embassy to the British Government - which has been leaked to The Daily Telegraph - reveals the Americans have "deep concerns with the proposal". They threaten the Treasury with legal action over the planned tax increase.
Ministers are planning to sharply increase the amount of money raised from airline taxes in a move that will net an extra £520 million annually.
Airlines - already struggling to deal with record fuel prices - calculate that the tax per person on a flight to America or other long-haul destinations will rise from £40 to about £100 from next year. The levy will be passed on to passengers.
The unusual attack from the Americans - ahead of a visit to Britain by President Bush next week - is understood to be causing serious concerns within Downing Street. It could lead to yet another climb-down by the Government over a major tax policy.
The six-page letter provides a detailed rebuttal of claims made by Alistair Darling, the Chancellor, that taxes on flying are being increased to produce environmental benefits.
The letter states: "The Treasury's proposal, although cast as an environmental measure, appears in reality to constitute nothing more than a device for generating additional revenue from the airline community."
"There is no linkage between the funds collected from airlines and the mitigation of any environmental impact of airline emissions or any other environmental problem…Moreover, the Treasury's proposal does not demonstrate that the new duty would influence airlines to adjust their fleets or their booking practices to achieve higher load factors…Nor are any data provided to justify the levy based on an assessment of damage from aircraft emissions."
The American Embassy - which is headed by Ambassador Robert Tuttle - also warns Britain that the proposed levy threatens to damage this country's competitiveness.
"The proposed duty, by raising the overall cost of flying aircraft to the United Kingdom relative to other destinations, is likely to diminish the number of flights operating to and from the United Kingdom," the official note sent on April 15th states.
"This would seem an anomalous result, however, given the focus in the United Kingdom on, among other things, restoration of the competitiveness of Heathrow Airport with the opening of Terminal 5 and consideration of a third runway."
The Americans also warn the Treasury that the "proposed duty raises serious legal concerns".
It details a number of international treaties and agreements which would allegedly be breached by the new tax raising the spectre of international legal action. The Americans have also sent the memo to other European governments.
The intervention of the American Government is the latest setback to hit the Treasury who have already had to water down a series of other policies announced in the budget and pre-budget report over the past year
The issue is particularly sensitive as airlines - particularly in America - are suffering from the sharp rise in fuel prices and travellers are faced with a range of higher fees and fares for this year's summer holidays.
A source close to the discussions said: "The whole thing is a total nightmare. The Treasury have made a major mistake and not thought through the consequences. The Chancellor will have to sort this out or he will threaten the health of the airline industry in this country."
Under the plans unveiled by Alistair Darling, the Chancellor, last year, the way in which flights are taxed will be changed from autumn 2009. Instead of each passenger paying a fixed levy per flight, the Treasury will instead tax each plane. Airlines will then pass on the tax to passengers.
The amount paid per plane will depend on how far it is travelling with the world divided into three taxation zones and European flights charged less that American and other long-haul destinations.
There will therefore be a major incentive for people flying long-haul not to take direct flights but to change planes in Europe - producing a significant disadvantage for British and American airlines that operate direct flights to the US and other destinations.
It is unusual for a foreign Government to launch such a detailed attack on a domestic British policy.
Mr Darling is also thought to have come under pressure from the US over plans to increase tax on non-domiciled people - including wealthy Americans - living in this country. He backtracked on this proposal.
The Treasury has also backed down on plans to change the taxation of small businesses and entrepreneurs and offered compensation to those who lost out following the abolition of the 10p rate of income tax. Mr Darling and Mr Brown are also under intense pressure to abolish planned increases in motoring taxes.
Along with the motoring tax rises, the airline levy is the latest example of a large tax rise being implemented under the guise of an environmental measure.
When announcing the proposal, Mr Darling, said it was to "encourage more efficient use of planes" so that aviation makes a "greater contribution in respect of its environmental impact".
A spokesman for the Treasury insisted that the proposed tax did offer environmental benefits.
"The per plane tax is intended to ensure the industry makes a greater contribution towards its environmental costs and to ensure that the aviation sector continues to contribute fairly and equitably towards the funding of public services," he said.
"The Government aims to have a fairer duty more in line with the environmental impacts of flights, including the distance travelled, and which takes account of any social or economic impacts including market distortions. We are committed to meeting our international obligations under the Chicago Convention and the EU-US Open Skies bilateral agreement and would not propose a measure that we considered illegal."
No comments:
Post a Comment