Free On Board

By Global Tax Weekly

We should give Ireland (Eire, that is) a bouquet for dropping its air travel tax, although it’s possible that the credit really belongs to RyanAir and the European Commission (in very unequal proportions). It’s like free will: when a human being does something, you can usually prove that they did it in response to external or historical causes. But at the end of the day, they still have to take the action themselves. So, RyanAir may have threatened to remove untold numbers of flights and flight attendants (who would go to live in Warsaw, instead); and the EU may have disallowed the really juicy parts of the ticket tax. But eventually the Government has to act, and it has. Unlike some other governments, which persist in levying this most illogical and destructive of all taxes, notably the UK. We have long ago ceased believing governmental environmental blandishments as regards the ticket tax: it’s a money-grab, pure and simple. People have to fly, so let’s make them pay for it. Very little demand elasticity, in the jargon. That’s palpable nonsense, and governments only pretend to believe it because their policy-making processes are not well adapted to being intelligent. Dramatic swings in holidaying statistics as a result of quite minor economic changes show how much human behaviour can be affected on the margin: people’s decisions are far more emotional than rational, and just a small amount of additional tangible evidence can have a quite disproportionate impact on on their final behaviour. Ask the Caribbean, which sees the UK’s air passenger duty as a major existential threat to its economies. Nasty as the APD is, it seems counter-intuitive that a couple of hundred pounds could make the difference between spending or not spending five thousand pounds on a Caribbean holiday, but that’s how human minds work. I suppose it’s partly that people don’t like paying away money that is overtly going to be mis-spent. Everyone knows that their government will waste a high proportion of any money that it can get hold of; but tax on aviation fuel (for instance) somehow seems less directly rapacious than APT. Not logical, but then we aren’t. So yes, Ministers do have free will, but no, they don’t have a clue as to how to exercise it accurately. Except on the Liffey, it seems.

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