News

The Chancellor is set to hit the trade with a tax double whammy as he seeks to plug the black hole in Government finances.

European finance ministers are expected to discuss changes to the Tour Operators Margin Scheme next Tuesday that would add up to £25 to the price of a package holiday, while a doubling of Air Passenger Duty in next month’s Aviation White Paper would boost Treasury coffers by a further £800 million.

Current EU presidency holder Italy wants to push through VAT increases before its term of office ends on December 31, and fears are growing Gordon Brown will agree to a tax on cross-border travel to fight off other proposed increases, including VAT on children’s clothes.

TOMS consultant Martin Pooley said: “It is a political decision and changes to TOMS will happen. The Government has the chance to boost its coffers, blame the EU and get amendments to other directives in return.”

Pooley, who has hundreds of operator customers, said the introduction of VAT on flights would increase one of his client’s costs by £1 million.

Meanwhile, APD is expected to double to £10 for short haul and £40 for long haul in next month’s Aviation White Paper. Observers believe the Government will throw in the tax as a sweetener to environmental campaigners when it gives the go-ahead for more runways in the southeast.

The Government attempted to quell the fears. The Department for Transport dismissed APD changes as speculation, while a Treasury spokesman said: “We are not going to sacrifice any of our zero or reduced VAT rates.”