Air passenger duty changes hit snag

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Image caption Air passenger duty is charged on all flights from UK airports

Plans to replace air passenger duty with a discounted alternative may have to be delayed.

The Scottish government wants to replace Air Passenger Duty (APD) with a new devolved Air Departure Tax (ADT) in Scotland from April next year.

However, it said plans to continue exempting journeys from airports in the Highlands and Islands required EU approval under state aid rules.

It is understood that getting this approval could take longer than Brexit.

Finance Secretary Derek Mackay is expected to set out the position in a Holyrood statement later. The Scottish government is still working on options to avoid a delay.

The Scottish Parliament was given powers to charge tax on passengers leaving Scottish airports under the Scotland Act, which came into force last year. MSPs signed off the creation of the new tax by 108 votes to 11 in June.

The Scottish government wants to cut the new tax by 50%, before eventually scrapping it completely. It argues the move will boost the economy by increasing the number of flights to and from the country.

However, even before MSPs debate rates, exemptions for the Highlands and Islands are proving an issue for the new tax.

Image caption Derek Mackay has said ministers “strongly support retaining” exemptions for Highlands and Islands airports

Mr Mackay told MSPs during an early debate of the new tax that there was an “important policy and legal matter” with the exemptions, which he said the government “strongly supports retaining”.

He said: “The Scottish government’s view is that such an exemption has to be notified to and assessed by the European Commission under state-aid rules before it is implemented, in compliance with European Union law.

“The Scottish government will work closely with the UK government to resolve that matter. As the EU member state, the UK is responsible for notifying the exemption to the European Commission.”

Talks have been held with the Treasury and Scottish Secretary David Mundell, and ministers are “exploring alternative solutions” in the meantime.

Budget deal

Ministers are now faced with either a lengthy legal wrangle to bring in ADT or a delay to its introduction and, in the meantime, retain the current system with the UK government.

The latter option would make it easier for the Scottish government to get a budget deal with the Greens who oppose cuts to aviation taxes.

The Greens have warned that the party’s six MSPs will not deal with ministers when it comes to budget talks next year unless there is rethink on plans to cut the current charges.

They are concerned about the environmental impact of more flights, and claim the cut would mainly benefit wealthy travellers and big business.

Ahead of the ministerial statement, Labour repeated its calls for the Scottish government to scrap its plan to cut ADT once it is eventually introduced.

MSP Neil Bibby said: “Cutting the Air Departure Tax will not make Scotland fairer or greener – all it will mean is less funding for hard pressed public services while the richest few get yet another bonus.”

However Conservative finance spokesman Murdo Fraser urged the SNP to stick to their guns, saying “there must be no backtracking on this commitment to our vital tourist industry”.

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