19 July 07
APD
win could cause refund headache
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A potential victory over the legality
of Air Passenger Duty could be soured by claims against agents and
operators for consumer repayments totalling £50 million.
A judicial review over the doubling of
APD is due to end today. If it goes the industry’s way, operators such
as Thomas Cook and MyTravel, which forced consumers to pay a levy to
cover their shortfalls, could face calls to refund millions of consumers
– with agents potentially having to administer refunds.
The case was brought by the FTO after
the then chancellor Gordon Brown gave seven weeks’ notice that APD
would double on February 1, catching operators on the hop.
Most were unable to recoup costs
because of rules on surcharging, forcing them to absorb an estimated £50
million in unplanned costs or levy new customers.
A verdict is likely next month. FTO
secretary general Andy Cooper said he was “very positive” about the
likelihood of success.
If the judge agrees the increase and
the tax itself are unlawful, operators which absorbed the extra will
simply put in refund claims, but others face the problem of refunding
customers. In February, Cook slapped a £5 levy on all new summer 2007
bookings to offset its losses, claiming it would keep a database of
those who had paid extra to refund them if the challenge was successful.
Two months later, MyTravel asked agents to collect the extra tax,
charging an “administration fee” of £1 per passenger, but not
paying the trade commission. The two brands could face claims from
around two million customers, but Cooper said the situation was unclear.
“There will be a moral obligation on
the government to do it, but not necessarily a legal one because of the
size and scale of the impact. We are in uncharted waters,” he said.
“Cook said that if we won the case,
their customers would be entitled to their money back. What is legally
clear is that you can’t be better off than you would otherwise have
been.”
Co-op Travel Group managing director
Mike Greenacre said: “We will support giving customers their money
back but if we have to return millions we need a proper process to
manage it.” Abta director Noel Josephides said the industry had
“shot itself in the foot”.
“If I was the government, I would ask
us what game we were playing. On one hand, we say we have lost all this
money, on the other, we are getting it back.”
Josephides said his own firm, Sunvil
Holidays, had absorbed the extra APD and would seek a refund from the
Treasury. The Judicial Review took place in London’s High Court this
week. Cooper said he had “no complaints” about the court’s
interpretation of events.
The FTO argued that doubling APD
breached operators’ human rights as they were given insufficient
notice. It also claims APD is illegal under the Chicago Convention,
which says taxes on passengers must be used for things such as security
or air traffic control.
The other argument is that APD breaches
the Treaty of Rome which ensures free movement of goods and services
across the EU.
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