UK air tax rise a threat to UAE

Flow from country's largest source of tourists may slow

A plan in Britain to increase tax on flights is expected to hit the tourism sector in the UAE, members of the industry say. The UK provides more travellers to the Emirates than any other market. The tax, known as an "air passenger duty", is to be increased from November by more than 30 per cent for travel to the UAE. The increase would vary from destination to destination, depending on the distance from the UK.

The plan would increase the levy paid by a family of four flying economy class from the UK to Dubai to £240 (Dh1,325) from £180. Under the new rate, the travel tax will have increased 200 per cent from early 2006. "Any kind of increase in taxes would have an impact [on travel to the UAE]," said Sean Tipton, a spokesman for the Association of British Travel Agents (ABTA). "It's a substantial rise. The British travel market is very price-sensitive, and we're just coming out of a very difficult recession." The UK government plans to double revenues from the duty to £3.8 billion by 2015-2016, it said last week.

The UK is the largest source of tourists for the UAE. Tourism directly contributes about 20 per cent of Dubai's GDP. The UK has already been hit hard by the economic downturn, which resulted in a drop of more than 16 per cent in the number of tourists from the area arriving in Dubai last year compared with 2008, according to the Dubai Department of Tourism and Commerce Marketing. Last year, the number of British hotels guests in Dubai declined to 714,877, from 854,601 in 2008.

The UK is also the largest overseas source of tourists for Abu Dhabi. The Abu Dhabi Tourism Authority said there was a 19 per cent increase to 31,320 hotel guests from the UK in the first quarter of this year compared with the same period last year. "Tax on aviation, through air passenger duty, in this country has risen disproportionately over the past five years," said Mark Tanzer, the chief executive of ABTA. "We all know that George Osborne has to balance the books," Mr Tanzer said, referring to the UK chancellor of the exchequer, "but to maximise the tax take on aviation, they must set it at a level where people can still afford to fly - not tax people out of the skies."

Mr Osborne indicated in his emergency budget last week that there might eventually be a switch to a "per plane" tax rather than a "per passenger" tax. The UN World Tourism Organisation (UNWTO) has also warned that tax increases are likely to harm the industry. "The tourism sector itself may be confronted with increased taxes, given the expected rise in UK departure tax and Germany's intention to introduce a new air tax as part of its budget-cutting plans," the organisation said this week.

"UNWTO cautions against the potential adverse effects of one-sided decisions on taxation which might harm the tourism sector." [e-mail]