Budget 2011: Osborne to unveil private jet flight tax

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This topic contains 12 replies, has 7 voices, and was last updated by  LuganoPirate 23 Mar 2011
at 17:17
.

Viewing 13 posts - 1 through 13 (of 13 total)

  • Anonymous

    Home@FL350
    Participant

    No increase to the APD, but looks like the government will try to squeeze aviation in other ways!

    Hard to make a justification for the government not to tax private jet travel (what about turbo props – like the popular King Air, is this on the radar screen too?) however I in principal hate to see this ‘tax creep.’

    While priviate jet travel is unfortunately not on my normal travel itineries – a couple times per year I get to ‘tag along’ with some well-placed friends. I wonder if this tax will cost them extra for having me onboard or if the tax will be per-aircraft, per flight (based on distance)?


    Binman62
    Participant

    Whatever level it is set at it is not going to drive them into penury and it will not make any difference to their lifestyle. After all they are not as a result of this tax going to have to make a decision between own brand and Heinz beans they next time they send their staff to the supermarket!

    We really must put this in perspective. For those us willing and able to spend £2000 up for a seat on an aircraft for 8 hours the addition of APD is not likely to make one jot of difference. Sure we all like a bargain and I for one will travel to lower my airfare but I have yet to say no to a flight simply on the basis of APD and I know no one who has done so.

    BA wants £9059 for a return to JFK in First leaving tomorrow and coming back next week. Of that £366 is taxes fees and charges and of that most goes to BA as a result of fuel surcharges. I hardly think that moving this charge to £400 or even £500 (as long as it was Tax) would make anyone change their minds about buying such a fare.

    For the same money 77 cataracts operations could be done restoring the sight of those blighted by a curable illness.

    It is of course entirely a matter for each individual how they wish to spend their money and good luck to you if F and J airfares are how you do it. But let’s not get carried away with the myth that APD is driving people away from flying. There is absolutely no evidence to support such a contention.


    SimonRowberry
    Participant

    I’m 100% in agreement with you, Binman. Or, in terms of the Osborne school of accounting, 112.756%.

    Simon


    LondonCity
    Participant

    Hello Binman 62

    “There is absolutely no evidence to support such a contention.”

    What you say is not strictly true.

    Our higher rates of APD have begun changing the way in which tour groups visit the UK and mainland Europe.

    These thrifty travellers now make the UK their first port of call to avoid APD and so reduce the price of their holiday. They then depart from an airport in mainland Europe such as Amsterdam (which has no such tax).

    They take the ferry between the UK and Holland to avoid even our cheaper short-haul rates of APD. Stena Line reckons 20,000 Indian tourists will take this route in 2011.

    See:

    http://www.stenaline.co.uk/ferry/media/news/increase-in-indian-tourists/


    VintageKrug
    Participant

    Do you really want to force wealth-generating individuals “into penury”? Is that at all sensible? While I agree it does seem fair to have simple flat APD tax on Business Jets, let’s not forget there are private pilots in single engine put-puts who enjoy a spin of a weekend, and those learning a trade so it’s not as simple as all that.

    Those who do arrive here in private planes (and in F and J) probably drop thousands in VAT and other taxes during their time spent in the UK, not to mention all the other real spend, so let’s not get all chippy and cite daft comparisons along the “think of the children!” lines.

    Bottom line is we are (just about) able to sustain a welfare state as a consequence not of high taxes, but because of this country’s capacity to generate wealth. Facilitating easy and also affordable transport is one of the ways in which we have historically achieved that, and APD is a barrier to this at a time of unprecedented inflation and other cost increases, and it needs to be reformed.

    I have certainly varied my travel plans and booking approach in light of the higher levels of APD. I know very many people who do so, to the detriment of both the environment (as we take more indirect routings) and also pushing business through other European hubs, sometimes onto non-UK airlines (perish the thought, but it does happen, apparently!). To there is no truth in the assertion that APD has not changed behaviours; it has.


    Binman62
    Participant

    Londoncity…point taken, but it could also have something to do with the fact that KLM charge £670 return from DEL to AMS of which almost £200 is a fuel surcharge. BA on the other hand want £856 for DEL LHR of which £76 is APD. (Based on May 1st ex DEL May 31st return.)
    At less than £200 the differences in fares will almost be removed in this particular instance when you add the ferry crossing etc. Perhaps it is something else that is pushing this traffic to Harwich and the ferry.

    KLM are £555 more expensive on the same dates for Business Class and seem to be consistently more expensive year round from the little research I have done.

    As many know, routing via a European city does not reduce APD unless you stop for more than 24 hours on through fare/ticket. A route like LHR HEL HKG on say AY, will not stop you paying LHR HKG APD levels unless you stop for more than 24 hours. When you factor in Hotels it may not make economic sense to stop.

    People will always look for way to buck the system and as I said we all love a bargain, but the APD is not seeing a rush of airlines out of LHR, LGW or MAN. I think only Ryan air have pulled out of anywhere and said it was APD but I certainly do not take that at face value.


    SimonRowberry
    Participant

    I equally agree with VK’s point about the need for wealth-generation. It is a tight balancing act, I am afraid.

    APD may have changed behaviours. But at the very margins, for precisely the reasons that BinMan cites. For F and J class individuals, time is usually money, and I do not believe that a “few additional quid” on a ticket is going to make them revise their plans or abort their trip.

    As a transport and environmental professional, I would point out that a massive change is needed to modify behaviours and I cannot see such a change ever being politically acceptable. APD is/was just tinkering at the edges.

    In my own personal opinion, we should be far more concerned about the LCC culture of people flying primarily because it is cheap (i.e. often simply “for the sake of it”), rather than to create wealth (and no, I am not saying that people shouldn’t have holidays – tourism is a critical element of wealth creation).

    It will be a very interesting year ahead for us all, with Arab unrest having an inevitable impact on oil prices, and the Fukushima disaster casting doubts on future nuclear programmes (as it has already in China) with a potential move back towards coal-fired generation. In this massively strategic context, APD is, I am afraid, a mere “pimple on a sausage” in environmental terms.

    Regards, Simon


    LondonCity
    Participant

    Hello Binman62,

    I would imagine inbound group tourists would likely visit at least one or two countries during their visit to Europe. So to avoid APD it’s logical they would arrive in the UK first of all. I am sure travel agents based in Asia, for example, would organise an open-jaw ticket for them.

    In the case of the Indian tourists, they could open jaw with either KL or BA or else they could use 9W into Heathrow but return directly from Brussels which is easily reached by road/rail from Holland..


    MartynSinclair
    Participant

    For as long as companies are willing to spend USD$150,000 to cross the atlantic in a private jet, I dont think that there are going to be many complaints if Mr. Osbourne creates a new private jet tax.

    All that it will mean is that the super rich (indivduals and coporates) may have to downgrade the fixtures and fittings.

    To give you some idea of the numbers involved in running a private jet, longhaul, you have acquisition costs of around $10,000,000 (thats second hand). Work on a budget of around USD$ 30,000,000 for a new state of the art aircraft, capable of crossing the atlantic non stop and thats delivered green (i.e. bare). Another USD$ 5 – 7 million should see it fitted out nicely.

    Then you have the annual running costs, crews, maintenance and general day to costs, budget on around 20% of the acquisition costs.

    There is one businessman, who jets in to Luton in his Gulfstream 5 (the Ferarri of the skies) on a Monday and then back to Monaco for the weekend. I have no issue with business jets and their uses, They have in part given me an income.

    Its all about choice and good luck to the likes of Abramovich who uses his 777 to jet in for the Chelsea home games, G-d only knows what it costs, but its his money.

    I think Mr Osbourne is perfectly correct in creating a new private jet tax afterall, I doubt very much that the owners will even notice the additonal costs.

    The private pilot that VintageKrug talks about should be unaffected by this tax as the “put put” as he calls them are piston pwered not jet powered.


    LuganoPirate
    Participant

    I would imagine an Indian tour company will get very favourable prices when they book with the airlines, and could well do for example, Delhi – ams – LCY. then ferry and back from AMS. If it wasn’t cheaper they wouldn’t do it and the Indians are some of the toughest bargainers I have ever known!

    In support of LondonCity, I have several very wealthy UK friends, who travel to Phuket, Cape Town and other summer destination for the Christmas break. Despite being able to afford the APD they take Easyjet to Milan or Rome, then fly from there. Not only are the fares cheaper, but the APD etc are in the 10’s of Euro’s rather than 100’s of pounds. Each of them are in groups of 9 or 10 (Couple, 3 kids, nanny, parents) and according to one friend he saved over £15,000 this way to Phuket.

    I grant you, a few extra pounds of APD will not make much of a difference on a £9,000 ticket, but cumulatively it adds up and especially if you are paying for it from your own pocket on income taxed at 50%, you will have to earn twice that to pay for it.


    Binman62
    Participant

    LuganoPirate

    You don’t need to be a of 9 or 10 make the savings you have highlighted. I have just saved £14000 for 4 to Asia this summer by begining in Milan and not London yet I am on the same flights ex LHR. APD is not the driving force for this, it is the fares and if the fares were the same here as in Milan then the addition of APD would not be make the trek to Milan worth my while. There are also cheaper places to depart from in Europe and again nothing to do with APD simply lower airfares.

    As for the issue of high net worth visitors dropping thousands in VAT and other taxes…… of course they do and that is why the are queuing up at the VAT desks in T5 T3 and elswhere getting it all back!!!. Having a near worthless currency and a VAT regime that allows refunds in this way simply means the Gucci bag and Prada shoes are cheaper here than somewhere else. Having APD of £150 or even £300 on a F or J ticket is not going to stop or even affect these individuals as the VAT reclaims are often many times this amount. The USA has been imposing taxes and charges for years and no one complains, so again we need to put APD in perspective.


    LuganoPirate
    Participant

    I see your point Binman, but after I saw your post I called my friend. He agrees it is not just the APD but the cumulative effect of all the taxes and of course the much cheaper tickets out of Milan that is his driving force. In fact he had never considered Milan until the APD was raised to what he thought was unreasonable levels. Out of curiosity he checked other departure points and then he saw the fare difference. That was the deciding factor.

    The point VK makes about being a wealth generating nation is (was?) true, the trouble is so many of those entrepreneurs are fed up with the taxes and laws and are either selling up (or closing down) and retiring overseas on the proceeds.

    In my case I moved what was an exporting business from the UK to another country, so that the UK then became an importer of those products.

    My argument with HMG centered around the 90 day ruling. It was not that I wanted to live in the UK, but needed to be there and my family were all based outside the UK. I had a big personal tax bill, could not be bothered to fight it, and instead sold the factory building and land, and from the profit paid the tax bill, paid for a new factory and equipment and restarted production elsewhere. The other country had no problem with me coming in and out and there was no “day” counting.

    Where I live now we are seeing almost daily Brits coming to Lugano and setting up here. Their families quickly settle in and all say they are here for the same reason – tax.

    The fact remains we can try and maintain a moral stance and say we should pay tax, and I agree, but when that tax, in whatever form, is seen as a burden, people go!

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