All flights and ferry tickets from the UK and Europe could be hit with VAT under proposals that are being considered by the European Commission.
Flights, ferry tickets and cruises within the EU are currently VAT exempt, however were the proposals carried out, prices would rise by 20 percent.
The EC green paper – entitled “On the future of VAT: Towards a simpler, more robust and efficient VAT system” – argues that “putting an end to the exemptions applicable to international passenger transport by air or sea would only ensure a level playing field”.
It also argues that the proposals could reduce carbon dioxide emissions in the “fight against climate change”.
However initial reaction to the green paper is that the proposals would cripple a fragile industry still reeling from the recent Air Passenger Duty hikes. Since February 2007, APD has increased from £5 to £12 on short-haul flights and from £20 to between £60 and £85 on long-haul routes.
Simon Buck, chief executive of the British Air Transport Association, described the proposal as “crazy”.
He told The Telegraph: “The aviation industry is already grossly overtaxed. It is having a detrimental effect on UK tourism at a time when we should be looking to strengthen the industry.
He urged the UK government to follow the example set by its Irish counterpart, which recently cut APD from €10 euros to €3 in an attempt to reignite the country’s flagging tourism economy.
He said “The level of tax is discouraging overseas visitors. A Chinese family coming to the UK will pay over £600 in tax and visa costs, compared to just £200 in they were visiting Paris.
“Perhaps that is why 688,000 Chinese tourists visit France each year, and just 100,000 visit the UK.”