Air travel tax to be reduced

The air travel tax on passengers leaving Irish airports is to be reduced from €10 to €3 but will be reviewed, the Minister for Finance said today as he unveiled Budget 2011.

Noting there had been calls for the abolition of the tax on the basis it was causing a reduction in visitor numbers, Brian Lenihan said it was decided the reduced air travel tax would come into effect on March 1st.

"But let me be clear: this reduced rate is being applied on a temporary basis until the end of 2011," he said.

"The position will be reviewed next year, and the rate will be increased unless there is evidence of an appropriate response from the airlines. I do not want to see the reduction in the tax being used by airlines as an opportunity to raise their fees and charges."

Mr Lenihan also announced the Dublin Airport Authority is prepared to introduce an incentive scheme to provide, subject to certain conditions, a full rebate of airport charges for any additional traffic above the current levels. He said the authority would provide further details of the scheme.

Minister for Tourism Mary Hanafin said the travel tax had been identified as a key requirement to help boost overseas visitor numbers, adding she hoped airlines would respond positively to the cut.

However, Ryanair condemned what it said was a tourist half-measure. The carrier said although the reduction was welcome, "it was clearly forced on the Irish Government by the EU Commission’s infringement proceedings against the illegal €10 tax".

Ryanair chief Michael O'Leary claimed the tax reduction would not do anything to reverse the recent decline in Irish air traffic and tourism, adding the new €3 level will bring in less than €35 million a year.

"While the Government reduces the tourist tax by €7, the Government owned DAA monopoly has increased airport fees by over €11 per departing passenger over 2010 and 2011," he said.

The chief executive of the Irish Tourist Industry Confederation (ITIC) said the cut in the airport departure tax was a "significant development".

"When this is coupled with the DAA incentive of free landing charges for all additional new passengers produced by the carriers, this is a major incentive for the airlines to develop new routes,” Eamonn McKeon said.

"The capital commitment of €25 million to tourism product development is also welcome," Mr McKeon added.

The Irish Hotels' Federation also welcomed what it said was "strong and decisive action" in the Budget to assist the tourism sector. The body said the Government's commitment to broadly maintaining levels of marketing funding for tourism at €41.5 million was a vital investment in the future of the industry.

Chief executive Tim Fenn said the lessening of the travel tax "should have a positive impact to assist in increasing visitor numbers from our key markets such as Britain and Germany".

Labour tourism spokeswoman Mary Upton said the tax reduction was only one step that was needed to revive the tourist industry.

Dismissing the idea to impose an additional charge on tourists as a "disaster", Ms Upton noted the reduced tax is only for a temporary period and said the onus is now on airlines to deliver increased tourist numbers to Ireland.

The air travel tax on departures was introduced on March 30th, 2009, and is expected to yield €105 million in 2010, despite the impact of volcanic ash on air travel earlier this year, the Minister said.

Mr Lenihan added similar taxes apply in countries such as the United Kingdom, France, Australia, and the United States.

However, Minister for Tourism Mary Hanafin recently conceded the controversial tax was impacting negatively on decisions by airlines to adopt new routes to Ireland.

It recently emerged the tax infringes rules of the European Commission, which has taken infringement proceedings against Ireland.

Officials are demanding that the same rate of tax should apply to all journeys within the EU. Currently a €10 tax applies to journeys from Ireland, apart from flights to destinations less than 300km from Dublin. A lower €2 rate applies to such destinations within Ireland and in parts of Britain.