John Moloney (Laois-Offaly, Fianna Fail)

I am pleased to take this opportunity to clarify matters relating to the introduction of an air travel tax that the Minister for Finance announced in budget 2009, which will come into force for passengers departing from Irish airports as and from 30 March 2009. The Finance (No. 2) Act 2008 confirms the introduction of an air travel tax from 30 March 2009. The general rate applying will be €10 per passenger, with a lower rate of €2 for short air journeys. The Minister, however, took account of concerns raised by the regional airports, particularly those on the western seaboard.

The lower rate of €2 will apply to departures from any Irish airport where the destination is 300 kms or less from Dublin airport. This means all Irish departures to locations such as Manchester, Liverpool and Glasgow will be subject to the €2 rate. The Minister has also decided that a relatively short air journey should reflect a lower charge. It is not unusual for the price of fares for longer journeys to be higher than those for shorter journeys and the tax reflects that position. The Minister was also conscious that the tax would apply to both the outward and return journeys in respect of domestic flights. In addition, the Minister was cognisant of the greater competition that exists from other forms of travel for that sector relative to longer flights.

Ireland is not unique in applying a tax on air travel. Many EU member states and other countries worldwide apply similar taxes. For example, our nearest neighbour, the UK, has applied a similar tax for several years. Currently, the UK applies an air passenger duty of £10, approximately €11, for a standard ticket for any destination in the UK or Europe. For all other destinations, the rate is £20, approximately €22. Both these rates double for tickets other than economy class.

Moreover, the UK Government announced in its 2008 pre-budget speech that it would be revising the duty with an introduction of four bands of 2,000 miles each together with an increase in rates of air passenger duty with effect from 1 November 2009. The new rates will comprise the following: band A, zero to 2,000 miles, £11; band B, 2,001 to 4,000 miles, £45; band C, 4,001 to 6,000 miles, £50; and band D, over 6,000 miles, £55 in the case of economy class. These rates double in the case of tickets other than economy class. The base band A rate will be further increased to £12 from 1 November 2010, with increases of 30% to over 50% being applied to the other three bands B, C and D.

A new Dutch aviation tax entered into force in July last year. The tax is charged at €11.50 for EU destinations and €45 for other destinations. In France, the civil aviation tax is charged at approximately €4 for EU destinations and €7 for other destinations. Australia and New Zealand, both dependent on air travel like Ireland, also apply departure taxes.

The proposed air travel tax rates, both for shorter and longer journeys, are not unreasonable when compared with rates in other countries. For example, a person travelling in the UK will be liable to pay the UK air passenger duty of £10, approximately €11, on each leg of the journey. A passenger departing from Manchester to London will be subject to the £10 tax and on the return journey departing from London to Manchester will also be subject to the £10 tax, giving a total tax liability of £20, approximately €22. In Ireland, a person travelling in the State will be liable to pay €2 in tax on each leg of the journey, giving a total tax liability of €4. Furthermore, both the UK and Dutch rates in respect of longer flights are over two and four times higher, respectively, than the Irish rate.

The Government also acknowledges that low cost travel has been good for Ireland. The pioneers in this area deserve to be commended. However, in analysing the new tax, we must not overplay its impact.

For example, a fare from Shannon to London Stansted that is initially presented as €15 with a similar €15 return fare will actually cost a passenger over €90 when all charges are included.

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