7 thoughts on “Time to scrap Air Passenger Duty”

  1. Posted 15/12/2014 at 23:44 | Permalink

    There is a limited number of landing slots at Heathrow and Gatwick.

    When that happens, and supply of something becomes inelastic, those slots gain a value. Shortages push up prices. i.e not based on costs.

    All APD does is take a fraction of the difference between the cost price and the shortage(monopoly) price. It doesn’t change the ticket selling price at all. The tax falls squarely on the unearned profit part of the ticket price.

    Which is why, if you reduce APD, ticket prices will not fall, but airline profits will rise.

    Of course, it would be even better if auctioned off those slots, but APD is better than nothing.

  2. Posted 16/12/2014 at 08:50 | Permalink

    @Benji, is your logic that the APD is justified purely because it reduces airline profits?

  3. Posted 16/12/2014 at 10:48 | Permalink

    Benji, you probably mean airport profits, not airline profits.
    Anyway, a problem easily solved: Allow airports to expand http://www.iea.org.uk/publications/research/de-politicising-airport-expansion

  4. Posted 16/12/2014 at 14:16 | Permalink

    If the environmental line doesn’t work they will just say they need it for the NHS

  5. Posted 16/12/2014 at 14:24 | Permalink

    @Henry

    Those aren’t earned profits. They are entirely due to State granted privileges. Which they should pay for.Just like when mobile phone operators bid for bandwidth allocation. Or when oil companies pay royalties/petroleum tax to access our deposits in the North Sea. APD, therefore carries much fewer deadweight losses than taxes on income/capital. Auctions would have zero. In fact they may even help with efficiency.

  6. Posted 16/12/2014 at 14:26 | Permalink

    @ Kris.

    Those slots, worth billions of pounds, are owned by the airlines. So,AFAIK its their profits that APD effects., but you may know better.

    Yes, expansion is what is needed. But, at certain times of day, landing slots are always going to gain a value, no matter how many extra runways we build(within reason).

    So, we should always auction them off, or second best option, some sort of tax.

  7. Posted 16/12/2014 at 14:54 | Permalink

    @Benji, I am recommending something like that in the paper (pp. 58-60)

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