ICAEW Scotland Political Consultant, Linda Bruce, reports back on member responses to a recent Scottish Government Consultation.
ICAEW Scotland members have responded to the Scottish Government’s consultation on proposals to introduce a new Air Departure Tax (ADT), at 50% the level of the current UK-wide tax, know as Air Passenger Duty (APD).
In its consultation document, published this summer, The Scottish Government states that it believes that 'a 50% reduction in the overall burden of ADT by the end of the current session of Parliament (2021) will boost Scotland’s air connectivity and economic competitiveness, encouraging the establishment of new routes which would enhance business connectivity and inbound tourism and help generate sustainable growth.' 
However, none of the ICAEW Scotland members who contributed to our response supported the plan for this tax reduction. Environmental concerns were to the fore, with worries about a tax cut aimed at increasing air traffic being detrimental to the Government’s stated ambitions to tackle climate change. Our members also generally felt that there is no need to reduce ADT in Scotland as passenger numbers appear to be increasing regardless of the level of this charge.
And, from the point of view of general principles of taxation, referencing the Tax Faculty’s Ten Tenets for a better tax system, our response made the point that this proposed tax cut would potentially be unfair, primarily benefitting wealthier business travellers, outgoing and incoming (domestic) tourists, whose decision to make their journey is not particularly cost-sensitive.
A final point of our response sought to remind policymakers that when a tax is reduced in order to support a particular behavior or sector, it must be accompanied by an increase in another tax or a cut to some tax-funded service elsewhere. In the absence of an alternative proposal, such as raising a tax based on fuel used, and paid by the airline, our members concluded that reducing the level of ADT in the future would carry more risks than rewards.
Our response, along with those of other interested groups and individuals, was submitted last month: so, what happens next? It looks as though this tax cut is unlikely to fly any time soon, with Finance Secretary Derek Mackay making a statement on 5 October blaming the UK Government for placing unacceptable conditions on notifying the European Commission of the continuing exemption from ADT of the Highlands and Islands. Mr Mackay concluded: 'I cannot see ADT put into operation with this significant uncertainty hanging over the Highlands and Islands. I therefore urge the UK Government to … recognise their responsibilities and to support our proposal which would enable ADT to go forward as planned without causing harm to the Highlands and Islands economies' . On the same day, the BBC suggested that gaining this approval 'could take longer than Brexit' , indicating potentially turbulent times ahead for this particular Scottish Government policy.