Brian Lenihan Jnr (Dublin West, Fianna Fail)

I thank Members who have contributed to this debate. Section 49 confirms the budget day change to the rates of air travel tax. A single rate of €3 per departing passenger will come into operation on 1 March, replacing the existing distance-related rates of €2 and €10. Deputy Noonan's amendment proposes that the new lower rate should be €2 rather than €3 and Deputy Doherty's amendment proposes that the new lower rate of €3 should instead be 1 cent.

The measure I provided for in the Finance Bill, namely, the reduction from €10 to €3 will cost the Exchequer about €56 million in tax this year. In a full year the cost will be close to €70 million. Deputy Noonan's amendment would raise the cost by about €10 million to €12 million. Deputy Doherty's amendment would cost in the region of an additional €35 million in a full year, in effect, abolishing the tax.

I agree with Deputy Noonan that the whole basis of such a change must be whether delivery takes place from the carriers and in my budget speech I made that very clear. I hope the incoming Government will review the air travel tax in the light of its experience with the carriers. The announcement in the budget was not restricted to the air travel tax but also allowed free landing rights at Dublin Airport Authority airports beyond certain levels of passengers.

Ireland is not unique in applying a tax on air travel. A number of countries within the EU apply similar taxes, including the United Kingdom and France. Both Australia and New Zealand apply similar taxes. The United States has introduced a tourist tax for tourists travelling to the United States by air. Germany and Austria have just introduced an air travel tax to apply from January 2011. The rates of tax applied by many of those countries are higher than the Irish rates, substantially so in some cases, and the trend in Europe is towards applying a tax on air travel.

There have been calls to abolish the tax on the basis that it adversely affects the number of people travelling to Ireland. I have some difficulty accepting that proposition and I consider that the impact of the air travel tax is being over-stated. I take Deputy Noonan's point about the effect of this on the balance sheet.

The numbers travelling appear to be more closely related to other factors, including the level of economic activity. Notwithstanding reservations, I decided that a single revised rate of air travel tax at €3 would come into effect on 1 March 2011. I stated in the budget that this reduction should apply only on a temporary basis with the rate being increased unless there is clear and decisive evidence of an appropriate response from the airlines through increasing capacity and the numbers travelling to Ireland by air. I am glad that the budget announcement is being supplemented by the incentive scheme introduced by Dublin Airport Authority for a full rebate of airport charges for additional traffic delivered above a certain threshold based on 2010 passenger levels.

A modest air tax of €3 will yield close to €35 million in a full year. The case for reducing that tax rate any further does not stand up, especially when we are under ongoing fiscal pressures where, understandably, there is a requirement that the tax system be as fair as possible. In addition, I would point out that the reduction in the air travel tax was a significant concession and it would be right to see if passenger numbers rise on foot of the change in the Finance Bill.

It is important as a matter of general policy, and apart from the particular details of this matter, that we protect the Revenue base of the State. It would have been possible, for example, at the time of the original abolition to maintain air travel tax at a certain low level. In general, I believe that is a better way to proceed than to proceed to complete abolition of the tax. History shows that when one gives a total exemption from any particular head of taxation, one generates a climate in which it becomes impossible to reintroduce it. I took a similar view in regard to stamp duties in the budget.

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