UK Air Passenger Duty (APD) is one of the most expensive taxes of its kind in the world and hampers Scotland’s ability to secure new direct international routes and maintain existing ones. Indeed, the level of taxation on the tourism sector, taking account of both VAT and APD, is amongst the highest in the world. This relatively high burden of taxation restricts the potential of the sector to grow to attract many more visitors to Scotland.
The Scottish Parliament has passed legislation to allow for APD to be replaced with an Air Departure Tax (ADT). The Scottish Government has set out a clear aim to reduce the burden of air passenger taxation by 50 per cent and to abolish the tax altogether when resources permit.
An exemption currently exists from APD for flights from the Highlands and Islands, we want this to continue. Transferring the exemption to the new tax requires notification to and assessment by the European Commission under State Aid rules, in compliance with EU law.
Only the UK government can make this notification but it has sought to impose unacceptable conditions before doing so. The Finance Secretary has now written to the UK government offering a solution that would ensure that ADT can be introduced, and the exemption for the Highlands and Islands can continue. You can find more information on the issue here.