Britain's air tax could start damaging trend - Key

Reuters

ADDRESSING THE ISSUES: British Prime Minister Gordon Brown meets his New Zealand counterpart John Key at 10 Downing Street.

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Prime Minister John Key is worried other countries may impose environment taxes on flights to New Zealand.

He is also raising questions about how rational British plans to more than double the tax to fly to Australasia are.

British Prime Minister Gordon Brown's pre-budget report proposed a $240 tax on flights to New Zealand by 2010. The increase would come under changes to Air Passenger Duty (APD) flight taxes, imposed to penalise travellers who use most environmentally-damaging fossil fuels.

The passenger levy - which increases the further a passenger is flying to help offset carbon emissions - would affect New Zealanders flying home from the United Kingdom.

Mr Key, who is also Tourism Minister, raised concerns with Mr Brown in an overnight meeting.

"I put our case on the table and indicated it would be of significant concern to New Zealand, what with the substantial numbers of British tourists coming to New Zealand and the fact that Britain is such a large market for us," he told NZPA.

Mr Key said that as prime minister he was very concerned about the situation if New Zealand was a less competitive place to visit.

On a subsequent Radio New Zealand interview Mr Key said he made strong arguments against the increase.

"Firstly as I pointed out to Prime Minister Gordon Brown it's not necessarily rational."

There were efficiency differences between airlines and aircraft and some airlines, including Air New Zealand, were trialling biofuels.

"So to simply put a random tax on because we are a long way away in our view is not only unfair but I am worried about the contagion effects of that, where you might get other countries in Europe imposing the same thing."

He questioned how the tax would work in practice, for instance when passengers had stopovers.

"We just indicated we were concerned about it, we didn't think it was fair, and we'd like to progress the issue further if we can."

The United Kingdom is New Zealand's second largest tourist market.

APD is currently levied at about $30 on economy flights within Europe and $113 beyond, with premium seats taxed at double those rates.

Under the changes, charges will be levied across four bands from November 2009.

Band A covers Europe, band B extends to destinations such as Egypt, Bahrain and the United States, band C takes in the Caribbean, and band D includes Australia and New Zealand.

Total APD on a band D flight will be $155 from next November and $NZ240 a year later.

Mr Key told NZPA the unresolved issue would not damage the relationship between the two countries.

"I don't think it will affect the relationship. I'm sure it will continue to be a very, very strong relationship that spans many spheres, from sporting to economic."

Mr Key said Mr Brown had made him feel very welcome.

"It's important to build that. It's a critical relationship from New Zealand's point of view."

Mr Key said the pair had discussed the world economy.

"It was a very broad-ranging discussion principally based on the economic crisis the world faces."

NZP