Highlands and Islands flights could be hit by new tax

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Fears have been voiced that passengers using Highlands and Islands airports could face a hike in fares because of a tax on flights.

The concern comes after the Scottish Parliament was told last week that plans to replace air passenger duty with a discounted alternative have been disrupted by legal issues.

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 getting this approval could take longer than Brexit.

Finance secretary Derek Mackay told MSPs the ‘mess’ was the UK government’s fault, saying it could cost the Scottish Government £320 million to maintain the exemption in the meantime.

Western Isles MSP Alasdair Allan has backed a Scottish Government proposal which would ensure island airports continue to be exempted from ADT.

An exemption from APD for flights from the Highlands and Islands has been in place since 2001. Transferring the exemption to the new ADT requires notification to the European Commission (EC) which can only be done by the UK Government, as the member state.

The UK Government has placed conditions on this and asked the Scottish Government to accept full liability for all the risks, including the potential knock-on effects on businesses, if the EC does not approve the exemption.

At Holyrood last week, Mr Mackay said the Scottish Government would not put the economies of the Highlands and Islands at risk and outlined an alternative proposal, which would use tax rates and bands to provide the same benefit for all Highlands and Islands flights, including connecting flights.

Dr Allan said: ‘The exemption to ADT is vital in keeping the high cost of flying from the Western Isles under some control. The UK government is proposing to work against previous agreements that there should be no detriment to either government as a result of devolution of further tax powers.

‘It is not acceptable the UK government’s conditions of notifying the European Commission could cause the Scottish taxpayer to forego revenue for delivering the current islands exemption. I am pleased the Scottish Government has outlined alternative proposals which would avoid risking that.

‘The UK government has indicated it is willing to delay the devolution of ADT. However, I do not believe this is an acceptable proposal and should only be considered as a last resort to protect the Highlands and Islands from financial detriment.’