Jerry Buttimer (Fine Gael)
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Cuirim fáilte roimh an Aire Stáit. Ar an gcéad dul síos, ba mhaith liom buíochas a ghabháil leat, a Chathaoirligh. I thank you, a Chathaoirligh, for allowing me to raise this matter. The budget has a habit of unearthing different issues, one of which is the imbalance in the taxation of air passengers in regions outside Dublin. I am talking predominantly about Cork. The budget undermines the aviation industry at a time when, as I hope the Minister of State realises, that industry and our airports are facing a difficult climate. Airports have been graded separately in respect of the forthcoming travel tax. This applies to Cork, Shannon, Knock, Dublin and other airports. The yield from this tax does not justify the imposition of a levy on departing passengers, especially from Cork Airport. I know the Minister of State does not like to use the terms "U-turn" or "flip flop", although I heard him saying so on the radio last week. I hope, however, the Government will acknowledge that Aer Lingus is in trouble with its unions and is trying to make money.

In addition, Ryanair posted disappointing figures today. Equally, the policy of separating Dublin and Cork airports has not happened, while the Cork Airport Authority has no chairperson and there are three vacancies on the board. This unfair €10 tax is a harsh imposition on all departing air passengers, especially the people of Cork. People in Cork, Shannon and Knock are being told that they are different from people in Dublin, but is that right? This ill thought-out tax is being imposed on the regions. The Minister of State strongly supports his region so I find it hard to understand why we are telling people that Ireland ends at the Red Cow roundabout. As a result of this tax, we are back to the Pale that we fought for so long to get rid of.

Although it is not within the remit of the Minister of State's Department, I have serious concerns about the Government's general aviation policy and the way in which Cork Airport and the people of Cork are being victimised. Why is there no such taxation on private airports? Why is the Government jet not taxed, as well as the passengers using it? If they are taxed, the Minister of State should say so here. Are they taxed when they leave the country by air?

This proposed levy adds to the woes of our airports at a time of economic recession. We are penalising airports and passengers, which is a further harsh blow for our hard-pressed aviation industry. I travel a lot by plane to Dublin, but one could have driven a bus through Cork Airport last week. At times, one could land a jumbo jet on the concourse there. Rather than trying to dumb down our airports, we should try to attract people here by marketing our airports better. Why was this travel tax deemed to be necessary? Why was Dublin given preferential treatment? What can we deduce from this budgetary levy regarding our attitude to regional development?

The Minister of State should announce a U-turn or a flip flop on this measure tonight. On behalf of the people of Cork and other regions, I will accept whatever language he wishes to use. It is a matter of principle to look after our own areas. As the Minister of State knows, life does not begin and end at the Red Cow.

Martin Mansergh (Tipperary South, Fianna Fail)
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As someone who is very happy to use Cork Airport when I have the opportunity to do so, I pay tribute to its efficiency. I am pleased to take this opportunity, as presented by Senator Buttimer, to clarify the introduction of an air travel tax that the Minister for Finance announced in the budget, which will come into force for passengers departing from Irish airports on and from 30 March 2009.

The Minister for Finance answered parliamentary questions on this issue recently. As he stated previously, the general rate applying will be €10 per passenger, with a lower rate of €2 for shorter air journeys, that is, those not in excess of 300 kilometres. The Minister 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 the 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.

The structure of the new air travel tax benefits regional airports that operate flights to Dublin, where a tax of only €2 will apply. The Senator might wish to note that this is particularly important to Cork. For example, today, ten of the 31 departures of passenger aircraft were destined for Dublin.

Ireland is not unique in applying a tax on air travel. Many countries worldwide, and indeed within the EU, apply similar taxes. Our nearest neighbour, the UK, has applied a similar tax for over 20 years, at a rate of £10, or €12.65, for a standard ticket for any destination in the UK or Europe. For all other destinations the rate is £20, or €25.30. Both of these rates double for tickets other than economy class.

A new Dutch aviation tax entered into force in July this 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. The Belgian Government recently announced its intention to introduce an air travel tax, but the details are not yet available. Going further afield, Australia and New Zealand, which, like Ireland, are very dependent on air travel, also apply departure taxes.

The proposed rates for the Irish air travel tax are not unreasonable both for shorter and longer journeys, when compared with rates in other countries. Taking the UK as an example, a person travelling within the UK will be liable to pay the UK air passenger duty of £10, or €12.65, 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, that passenger will also be subject to the £10 tax, giving a total tax liability of £20, or approximately €25. 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. It is scarcely the cost of two hours' parking in most city centres.

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 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 illustration purposes the House may wish to note that at present a fare from Cork to London Stansted that is initially presented as €5 with a similar €5 return fare will cost a passenger €80 when all charges are included. This assumes no luggage is checked in, which would cost more. Included in the €80 is a €5 credit card handling fee per flight segment. This latter practice has been the subject of much criticism by consumer bodies. Assuming fares remained the same, the price of this trip would rise to €90 on foot of the new tax.

A person flying from London Stansted to Cork, or indeed from any airport in the UK to Ireland, already pays, through the airlines, £10 or €12.65, in air passenger duty to the UK Exchequer. Airlines do not appear to have any difficulty in applying the UK air passenger duty. I have seen no suggestion that they intend to curtail their services because of it. I am not convinced that the new tax would have a dramatic effect on passenger levels and the suggestion by some that the tax would see fares double for prospective passengers does not present the full picture. In any event, for visitors to Ireland the price of travelling to and from Ireland is only one of the costs they will consider before choosing their holiday destination. General price levels and the availability of reasonably priced quality accommodation will be just as important.

It is important to add that the recent spate of failures in the airline sector arose from the massive spike in oil prices. Price pressures are subsiding and fuel costs, which had increased to as much as 50% of some airlines' cost base, are falling dramatically. Airlines benefit from an international tax exemption on jet fuel. The extent of this benefit is illustrated by pointing out that tax as a percentage of the price of a litre of petrol is up to 60%.

The new tax is estimated to yield €95 million in 2009 and €150 million in a full year. In the context of the difficult fiscal position the Government now faces, this measure is necessary and not unreasonable.

Jerry Buttimer (Fine Gael)
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I have a brief supplementary question. I thank the Minister of State for his reply but I am not convinced. He stated that ten out of the 31 flights departing Cork are headed for Dublin, and he is correct, but many of those flights are going to onward destinations.