Scotland could slash air travel taxes under new UK deal

LONDON (Reuters) - Scotland is likely to slash taxes on passengers flying out of the country from next year following a new tax deal with Britain, giving Scottish airports an advantage over rivals south of the border in England. The Scottish Parliament was on Thursday promised new powers by the UK government, including control over air passenger duty (APD). That would allow the majority Scottish National Party (SNP) to fulfil its pledge to cut or even scrap the tax in Scotland. Britain's APD is a tax of between 13 pounds ($20.5) and 194 pounds depending on flight distance and class of travel, which is charged on each passenger leaving the country. A change to the tax on flying could make travelling out of Scotland, as opposed to England, cheaper for passengers, encouraging English people to travel north of the border to fly. The tax has been widely criticised by airlines and holiday companies, which argue the charge has a negative impact on the economy. They welcomed the prospect of a change to charges in Scotland. "Removing Scottish APD would see passengers rushing across the border to avoid paying the punitive tax at Newcastle, Manchester or any other English airport," said Willie Walsh, the chief executive of British Airways-owner IAG. "Who could blame them – a family of four flying to the U.S. would save 276 pounds in APD by heading north." Scrapping APD could boost tourism in Scotland by 200 million pounds annually, according to the airline group. Regional airline Flybe agreed that Scotland could benefit from more flights if the tax was reduced. "The move would not only encourage airlines to provide new routes and enhance travel for Scotland's passengers, but it would also significantly boost economic activity and connectivity for Scotland," Flybe chief executive Saad Hammad said. Scotland's new powers will not be implemented until after a UK parliamentary election in May next year, in a move which amounts to the biggest transfer of powers to Scotland from the United Kingdom since 1999 when a Scottish parliament was set up. The changes come after Scottish separatists lost an independence vote two months ago. (Reporting by Sarah Young; Additional reporting by Esha Vaish; Editing by Mark Potter)