Ireland Reduces Air Tax

I am surprised. For the second time in a year, I find myself in agreement with Michael O’Leary the chief executive of Ryanair in welcoming the cut in airline passenger tax in Ireland. From St David’s Day, March 1st (why not St Patrick’s Day?) the Irish government is reducing what they call the Air Travel Tax (The British equivalent is APD, Air Passenger Duty) from €10 to €3. However, there is a catch. It may be only temporary as they have announced that it is only temporary until the end of 2011. Ryanair said that tourism will continue to be strangled by the tax and called on the UK government to reduce its APD.

This announcement is, I think |a fairly significant one for not only tourism but for Ireland. Why?
Because it seems to suggest that the Irish are beginning to believe what many people and organizations have been saying for some time, namely that these sort of taxes are inhibiting the growth of the economy of a country by deterring passengers from flying into them. Belgium, Holland, and Spain have done away completely with these taxes. The UK has raised them time and time again over the last few years. Will UK politicians take notice of what the Irish have done?

But given that the state of Ireland’s finances are parlous, wouldn’t you have thought they would try and wring as much money as they could out of visitors to make it less of a strain on their nationals? But no, what it seems is that they are testing reducing the tax to see whether it encourages visitors and hence, brings more overseas money into the economy Certainly the Dutch concluded that this type of tax hurt their economy. That the Irish should turn to this thinking now is adventurous.

The British Air Transport Association, BATA, is quoted as saying that no other country has a tax that brings in so much revenue. But will it? Will tourists stay away from the UK next year and go places where a family of 4 can save a hundred or so on their annual holiday. Is someone in the treasury calculating how much tourism we have lost in 2010 by the big increases we had in November 2009. And again in November 2010. It’s all going to come down to money. The UK treasury will ditch the tax if it loses more than it raises. But that means someone needs to be marshalling the information now. And that seems a role for Visit Britain.