Air passenger duty is "a barrier to inward business", MPs warn today.
The All Party Parliamentary Group for Aviation calls on the government to undertake an economic analysis of the "impact of APD on growth and employment".
All efforts should be made "to ensure the UK retains and grows hub capacity" at Heathrow or a new purpose-built hub airport, the group also says.
Today’s report follows the group taking evidence from 60 organisations, as calls grow for the Coalition to reverse its position and support a third runway at Heathrow.
Group chairman Brian Donohoe MP said: "Our findings advocate a new direction for UK aviation and call upon all those with an involvement in the sector to look again at how aviation can be part of the solution to the UK's economic problems in a sustainable way.
"In order to achieve the greatest possible economic and social contribution from aviation, we need two things from government: a forward-looking aviation policy that allows for aviation growth; and a new approach to the taxation of aviation.
“Combined, a new approach could not only energise the sector but also provide a firm foundation for the UK's economic recovery.
"In common with all other sectors, aviation must continue to address its carbon emissions and environmental impacts. It has already achieved significant improvements but can and must do more.”
He added: "The EU Emissions Trading Scheme is supported by this group and provides a good framework for aviation's emissions to be reduced to the same levels achieved in 2005 by 2050."
British Air Transport Association chief executive Simon Buck, welcoming the findings, said: “Having listened to the evidence from all comers, the MPs have come to the very sound conclusion that high taxes on flying damage inward investment and tourism.
“It’s time we had some joined up government thinking on this.
“When will this government accept that a vigorous aviation industry is essential for the economy and for jobs and that we need to compete with our international rivals for business by growing our trading links with the rest of the world rather than taxing them out of existence or allowing them to wither away through a lack of airport capacity?”