Martin Mansergh (Tipperary South, Fianna Fail)

The base band A rate is being 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, also from that date. In France, the civil aviation tax is charged at around €4 for EU destinations and €7 for other destinations. Moving further afield, Australia and New Zealand which, like Ireland, are extraordinarily dependent on air travel also apply departure taxes.

The rates for the Irish air travel tax are not unreasonable, both for shorter and longer journeys, when compared to rates in other countries. Taking the United Kingdom as an example, a person travelling within the United Kingdom will be liable to pay the UK air passenger duty of £11, or approximately €12, on each leg of the journey, that is, a passenger departing from Manchester to London will be subject to the £11 tax and on the return journey departing from London to Manchester will also be subject to the £11 tax, giving a total tax liability of £22, or approximately €24. In Ireland, a person travelling within the State will be liable to pay €2 in tax on each leg of the journey, giving a total tax liability of €4. Furthermore, the UK rates in respect of longer flights range from moe than four times higher to five times higher than the Irish rate. The Government 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.

At the moment, 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 €100 when all charges are included, excluding the air travel tax. This assumes no luggage is checked in which would cost more. Included in the €100 is a €5 credit card handling fee per flight segment. This practice has been the subject of much criticism by consumer bodies. In addition, there is a recently introduced on-line check-in fee of €5 per flight segment. If a person cannot check in on-line, there is a €40 check-in fee per flight segment. Incidentally, the on-line check-in fee for a return flight to the UK equates to the amount of the air travel tax for that journey. It is also worth noting that in the case of a return journey within the State, the on-line check-in fee is two and a half times higher than the €4 air travel tax liability for those flights.

A person flying from London Stansted to Shannon, or indeed from any airport in the UK to Ireland, is already paying, through the airlines, £11 or around €12 in air passenger duty to the UK Exchequer. Airlines do not appear to have any difficulty in applying the UK air passenger duty. In the case of long-haul flights, a €10 tax as a proportion of the total price of a return fare is minimal. Visitors to Ireland are only subject to the tax on the return journey. The additional €10 or €2 in the context of a much larger purchasing decision involving travel, hotel expenditure and so on, should have only a limited effect on tourist numbers.

In addition to weak world economic activity, the spate of failures in the airline sector have been largely driven by a massive spike in oil prices in 2008. Price pressures have subsided and fuel costs - which had increased to as much as 50% of some airlines' cost base - have fallen considerably. Airlines benefit from an international tax exemption on jet fuel. The extent of this benefit is illustrated by the example that tax as a percentage of the price of a litre of petrol is currently in excess of 60%.

We have to bring a sense of balance to this debate. In the past few years we saw exceptional growth in air travel both to and from Ireland. Strong disposable incomes and consumer confidence at home led people to take, in some cases, several air trips per year. However, it should come as no surprise that given uncertainties in the economy generally, consumers have shown some reluctance to take or plan trips abroad. An air trip abroad generally involves expenditure of several hundred euro, so to blame singularly the introduction of a modest air travel tax of €10 or €2 for the reduction in passenger numbers is stretching credibility. It is difficult to understand how an airline that has complained vigorously about the €10 air tax, on the basis of price sensitivity of customers, can then introduce a non-discretionary on-line check-in fee of €5 per flight, or €10 per return flight.

The introduction of a relatively modest air travel tax is an important revenue raising measure in the context of the significant financial challenges we now face. The Minister for Finance has no plans to review the tax as proposed by the Deputies.

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