B1608 – Cruise and Air Transport Taxation (Amendment) Bill 2020

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Andrew97
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B1608 – Cruise and Air Transport Taxation (Amendment) Bill 2020, Miss Maddie MP





A
BILL
TO

Make provision for the reduction of tax for the cruise and aviation industry when servicing British Overseas Territories


BE IT ENACTED by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

Amendments

Add to Schedule 8 (zero-rated) Part II Group 8 (transport) of the Value Added Tax Act 1994 and adjust the numbering accordingly:—

5 Transport of cruise passengers—
(a) in any vehicle, ship or aircraft designed or adapted to carry more than 100 passengers or has a gross weight over 1000 gross tonnes whichever is less;
(b) by a universal service provider;
(c) on any leisure service;
(d) from a place within to a place outside the United Kingdom or vice versa, to the extent that those services are supplied in the United Kingdom; or
(e) from a place outside to a place outside the United Kingdom or vice versa, to the extent that those services are supplied in the United Kingdom and if the service is provided by a universal service provider domiciled in the United Kingdom where the service includes a stop in at least two territories in Schedule 16 (exempted territories).

Add to the Value Added Tax Act 1994:—

Schedule 16 (exempted territories)
Anguilla
Bermuda
British Antarctic Territory
British Indian Ocean Territory
British Virgin Islands
Cayman Islands
Falkland Islands
Gibraltar
Montserrat
Pitcairn, Henderson, Ducie and Oeno Islands
Saint Helena, Ascension and Tristan da Cunha
South Georgia and the South Sandwich Islands
Sovereign Base Areas of Akrotiri and Dhekelia
Turks and Caicos Islands

Add to the Finance Act 1994 and adjust the numbering accordingly:—

4B If the passenger's journey ends at a place in a territory specified in Part 4 of Schedule 5A—
(a)if the passenger's agreement for carriage provides for any class of travel in relation to every flight on the passenger's journey, the rate is £0, and
(b)in any other case where the class of travel is ambiguous the rate is £0.

Add to Schedule 5A (air passenger duty) of the Finance Act 1994:—

Part 4 (exempted territories)
Anguilla
Bermuda
British Antarctic Territory
British Indian Ocean Territory
British Virgin Islands
Cayman Islands
Falkland Islands
Gibraltar
Montserrat
Pitcairn, Henderson, Ducie and Oeno Islands
Saint Helena, Ascension and Tristan da Cunha
South Georgia and the South Sandwich Islands
Sovereign Base Areas of Akrotiri and Dhekelia
Turks and Caicos Islands

Extent, commencement and short title
(1) This Act extends to the United Kingdom
(2) This Act comes into force on the 6th April 2021.
(3) This Act may be cited as the Transport Act 2020.

Spoiler:
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Cost

APD contributes £3.8bn in revenue [1]. If we assume 5% of all flights from the UK visit an overseas territory (an extremely conservative assumption) the cost of the APD section will be £190m. The cruising industry is worth £2.58bn to the UK economy [2]. If we assume 10% of that is direct VAT receipts, the cost of zero-rating VAT on cruises will be £258n.

Total: - £500m

Notes

British Overseas Territories are not the most popular destination for British holidaymakers. This bill lowers tax on flights and cruises to BOTs to boost British visitors to those places.

The bill aims for three effects:

(1) Boost British visitors to overseas territories to strengthen the UK's relationship to them.
(2) Better connect overseas territories who can be struggling as their young people leave as we see in Saint Helena.
(3) Provide valuable tourism income for BOTs.

APD Changes

The primary beneficiaries will be Gibraltar, Turks and Caicos, Bermuda and the Cayman Islands who already connected to the UK. Less tax on flights will provide cheaper flights to these destinations, boosting passenger numbers.

The secondary beneficiaries will be the British Virgin Islands, Anguilla, Falkland Islands and Saint Helena who could be the recipient of new links to the UK. For example, British Airways might add on Anguilla or the BVI to an existing flight as they have done with Saint Kitts and Nevis flights that sometimes go via Antigua and Tobago. Alternatively, TUI might add a BVI leg to their Puerto Rico flights or Virgin Atlantic might expand services. In the case of Saint Helena, there are already companies looking at offering Saint Helena package holidays with flights from the UK.

VAT cut to cruises

Britain has a large cruising sector. VAT cuts to trips including ports of calls in BOTs will encourage British cruise lines to add BOTs to their itineraries. For example, P&O and Cunard might frequently add Anguilla and BVI to their Caribbean and Atlantic cruises. The Falkland Islands and South Georgia might be added to South American voyages, and cruises to Australasia will have an incentive to include the Pitcairn Islands.

Lastly, a final benefit is to inject some life into two industries hardest hit by COVID-19.

References
[1] https://www.statista.com/statistics/...ed-kingdom-uk/
[2] https://www.cruisetradenews.com/crui...cruise-indust/




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04MR17
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Has there been any indication that cruise or airline companies would be interested in doing this?

Is there evidence to support the idea that these places either can or want to take in more tourists?
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Theloniouss
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Inclined to oppose this, mostly because I don't think it would have the intended effect.
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Saracen's Fez
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Not sure that I think the reasoning is that compelling or that I feel the need to boost visits to BOTs in this way.

I'd also be interested to hear from the Libertarian proposer why they feel a market intervention is needed and BOTs are not able to hold their own in a competitive tourism market?
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CatusStarbright
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Miss Maddie is this compliant with EU regulations on what is allowed to be zero-rated?
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Iñigo de Loyola
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It seems like a good idea and will strengthen links with the Overseas Territories. Aye.
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El Salvador
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I agree that transportation between the UK and its overseas territories should receive privileges, but I'm not sure if cruising really should count as transportation.
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Miss Maddie
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(Original post by CatusStarbright)
Miss Maddie is this compliant with EU regulations on what is allowed to be zero-rated?
I didn't check. Seeing as this is implemented after the transition agreement, I would hope the government would negotiate an agreement that does not bind the country to needing to follow EU VAT rules.
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Jammy Duel
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(Original post by CatusStarbright)
Miss Maddie is this compliant with EU regulations on what is allowed to be zero-rated?
Which is relevant because? You're naive if you believe they will still be in place in any meaningful way come April.

Miss Maddie the normal way to add this would be as 5A (or 5B if there is already 5A, or 5C if etc)
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Miss Maddie
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(Original post by Saracen's Fez)
Not sure that I think the reasoning is that compelling or that I feel the need to boost visits to BOTs in this way.

I'd also be interested to hear from the Libertarian proposer why they feel a market intervention is needed and BOTs are not able to hold their own in a competitive tourism market?
BIOTs can sort of hold their own and they have growing tourist markets. The existing tourist Meccas in that part of the world have all the infrastructure, the favourable tax, the word of mouth and the quantity of hotels. In the cases of Cancun, Punta Cana and Montego Bay (the biggest tourist destinations there) their respective governments spend tens of billions of dollars developing the areas. Cancun used to be a baron wasteland riddled with cartel crime until the government stepped in. It's unrealistic to ask tiny island nations (which is what the BIOTs are) to compete against the Mexican government who has more to spend.This solution is not perfect and will not put BIOTs on the same level, what it does do is start encouraging British holidaymakers to holiday in BIOTs instead of the tourist Meccas.

Tourists are fickle, they are driven by price. BIOTS can offer the same weather and similar attractions. If the BIOTs can be more competitive on price some of the thousands of Brits who head to the Caribbean can go to the BIOTs.
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Miss Maddie
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(Original post by Jammy Duel)
Which is relevant because? You're naive if you believe they will still be in place in any meaningful way come April.

Miss Maddie the normal way to add this would be as 5A (or 5B if there is already 5A, or 5C if etc)
I was toying between doing that in part 4 where it's thematically linked or making it part 5.
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Jammy Duel
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The 100 passengers potentially cuts off some BOTs from the support, the Falklands for instance I know is served by A320s, but the direct route from the UK is a military flight from Brize Norton and some Voyager configurations would not meet the capacity requirement
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Miss Maddie
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Changes being made for the second reading:

5a to only specify ships. Air travel is already zero-rated so 5a doesn't make sense including planes. That's my fault not proof reading it properly when I coped and pasted a similar clause to edit.

Removing VAT on plane servicing. The services used during aircraft turnaround are taxed despite air travel being zero-rated. If I can find the relevant legislation and it's not costly I'll amend it.
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Napp
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Nope, doesnt seem to be overly helpful. Especially given much of the servicing of these territories comes from foreign domiciled companies making this a rather moot point, no?
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Jammy Duel
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(Original post by Miss Maddie)
Changes being made for the second reading:

5a to only specify ships. Air travel is already zero-rated so 5a doesn't make sense including planes. That's my fault not proof reading it properly when I coped and pasted a similar clause to edit.

Removing VAT on plane servicing. The services used during aircraft turnaround are taxed despite air travel being zero-rated. If I can find the relevant legislation and it's not costly I'll amend it.
The flight and the maintaining of the plane are separate things, just like electricity and the devices powered by said electricity.
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Jammy Duel
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(Original post by Napp)
Nope, doesnt seem to be overly helpful. Especially given much of the servicing of these territories comes from foreign domiciled companies making this a rather moot point, no?
You do realise that foreign domiciled companies still pay UK tax on relevant transactions? Apple don't avoid having to pay VAT just because they're domiciled in the US and their European subsidiary in Ireland. APD is still paid on flights even if they're flights made by an Indian flying with Air Canada.
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Miss Maddie
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(Original post by Napp)
Nope, doesnt seem to be overly helpful. Especially given much of the servicing of these territories comes from foreign domiciled companies making this a rather moot point, no?
No! It's as Jammy Duel said on APD and the same is true for VAT where foreign companies paying VAT on selling goods in the UK. You underestimate how many companies are still British. In the cruising industry the largest line (with over 50% of the global market share) is British as is Disney Cruises. Britain dominates the cruising industry.
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Rakas21
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Mr Speaker, i may support this in division.

I will want to see proper evidence of the 5% of flights heading to the named territories and a more credible source on the value of the cruise industry but as somebody that supports the integration of British Overseas Territories into the United Kingdom this is a good step.
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Rakas21
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(Original post by 04MR17)
Has there been any indication that cruise or airline companies would be interested in doing this?

Is there evidence to support the idea that these places either can or want to take in more tourists?
These are slightly strange questions.

Your essentially if firms and local governments want more money, the answer is yes.
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Rakas21
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(Original post by CatusStarbright)
Miss Maddie is this compliant with EU regulations on what is allowed to be zero-rated?
The Canon Amendment means that we can do what we like with VAT regardless.
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