Airlines: Lenihan warns airlines that travel tax cut is temporary
THE Government stopped short of axeing the controversial air travel tax but instead changed it to a flat rate of €3.
Previously the charge was €2 for a short flight (less than 300km) and €10 for a long-haul flight.
Finance Minister Brian Lenihan said the move, which takes effect from March, would help the tourism industry which has taken a hit in the past year.
But he warned airlines such as Ryanair, which has been blaming the tax for lower tourism figures, that the move is a temporary measure and would be reviewed next year.
"I do not want to see the reduction in tax being used by airlines as an opportunity to raise their fees and charges," Mr Lenihan said.
He added that other tourism incentives would be introduced by the Dublin Airport Authority, including a full rebate on charges for any additional traffic above current levels.
Recent figures show that 858,600 fewer tourists came to Ireland in the first nine months of 2010. The annual decline from Britain, Ireland's largest market, was 456,100.
Ryanair, which had promised to increase the number of passengers here by six million in return for the tax being abolished, condemned the reduction as a half measure, adding that it had to be reduced under EU rules.
The two-rate system that applied here breached EU regulations. The charge of €10 applied to flights from Ireland further than 300km and €2 for shorter trips to parts of Britain and internal flights.
"Today's Budget proves, yet again, that this Government has no tourism policy," said Ryanair boss Michael O'Leary.
"The reduction in the €10 tax to €3 was forced on them by the EU Commission's infringement proceedings and will bring in less than €35m per annum."
The tax reduction and incentives were welcomed by Tourism Minister Mary Hanafin. She said that while implementing the measure would mean the Government taking in €56m less in tax, the knock-on benefits would be felt throughout the wider industry which would help support the 250,000 people employed in tourism, culture and sports.
The Budget provides €400m in funds for the three sectors, including almost €148m for tourism and €150m for culture.
Tourism industry representatives said the changes were positive, especially the reduction in the travel tax.
"The capital commitment of €25m to tourism product development is also welcome and will allow for important new products and enhancement of existing products," Irish Tourist Industry Confederation chief executive Eamonn McKeon said.