Halving Air Passenger Duty would be a loss of £1.7m per year for the government.
Air Passenger Duty is a duty chargeable per passenger flying from UK airports to domestic and international destinations, such as the Isle of Man or USA.
Treasury Minister Alex Allinson says it would be ‘unlikely to encourage any significant increase in travel to or from the island’.
Dr Allinson said: ‘The Isle of Man Government charge APD on flights departing from Isle of Man airports, not on flights arriving in the Isle of Man, therefore any changes made by the Isle of Man Government to the APD rates will only apply to flights leaving the island.’
He said that historically the government had ensured rates of APD ‘mostly mirror the UK rates’ charged on flights from the UK to the island, which made the application of duty ‘streamlined for the airline operators’.
‘For a round-trip from the Isle of Man to the UK, the same rate of duty would be applicable to both legs of the journey, although the duty on the outgoing leg would be paid to the Isle of Man Government and the duty on the return leg paid to the UK Government,’ the minister said.
‘Reducing the Isle of Man rate of APD would therefore only provide a reduction in one leg of the journey.
‘APD on a standard seat, for an adult on a flight from the Isle of Man to the UK is £13.
‘To halve this rate would potentially reduce the flight cost by £6.50, should the airline pass the saving on to the customer. As the UK apply APD on the return leg of the journey, the saving on a return trip between the UK and Isle of Man would still only be £6.50.’
He added: ‘From discussions with the Department for Enterprise it is understood that this level of saving is unlikely to encourage any significant increase in travel to or from the island.
‘APD is forecast to generate £3.6m in 2023/24.
‘Reducing this by half would mean a loss of £1.7m of government revenue at a time of increasing pressure on government finances.’
Isle of Man Government introduced Air Passenger Duty in August 1994.
This duty is equivalent to the same named duty applied by the UK government but it is not a shared duty under the Customs and Excise Agreement and there is no requirement to keep the duty rates the same as the UK, Dr Allinson (pictured) said.