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UK airlines call for the tax break to help boost demand

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airplane travel

Every industry sector has taken a massive hit from the ugly Covid-19 pandemic of 2020. The coronavirus has affected everything for as far as you can see, and even beyond that. Of course, some industries have taken a more severe hit than others- the airline industry being one of them.

One of the essential preventive measures that we have learned to take during this Covid-19 pandemic is social distancing and home isolation. Since the coronavirus is a global pandemic, affecting every country, there is hardly any safe place left for us to retreat to. Being in closed spaces for some time with others is also forbidden, which makes travel and tourism, primarily via air travel, completely closed off as an option.

In the UK, it has been noted that the airlines, ground handling, and even airports have received some amount of relief from the government. This has come in the form of loans as well as government employment support schemes. However, there has still not been any specific package from the government for the industry. Taking this into account, several UK airlines have requested a tax break, which can help the industry boost their demand and, thus, stand up on their feet once again.

 A group which represented some UK airlines such as British Airways, Ryanair and EasyJethave called on the government to allow a suspension of tax on their flights. The airlines feel that this will help them to boost their demand, after having faced a severe fall due to the coronavirus pandemic. 

What exactly do the UK airlines have in mind?

The Covid-19 pandemic has affected the airline industry in a whole and harsh way. Although the airlines and airports have received great help, the industry itself is still suffering. Keeping this in mind, the UK airlines have asked the government to waive Air Passenger Duty for at least one year. This will help to save up to 8,000 jobs and also save routes in this industry, which has faced immense loss due to the coronavirus. By now, there have already been up to 30,000 job cuts, and there could still be many more to come.

 A sharp contrast is noticed in other European countries, where the government has stepped up to help quite instantly. Countries like France have granted their airline industry Air France around 7 billion Euros in the way of state-backed loans and other air. This aid has been immensely advantageous to the industry, helping them survive in these dire times.

Are tougher times coming up?

Several UK airlines have voiced their concerns over the upcoming winter season. They have stated that this season is particularly hard on the airline industry, as fewer people prefer to travel. With the winter creeping up steadily, the UK airline industry needs some form of aid at the earliest possible from their government to stay on their feet.

Tim Alderslade, the Airlines UK CEO, expressed concern that without adequate Government support for the airline sector, the UK airports run a genuine risk of losing some valuable routes, and of course, suffering enormous financial losses. An emergency APD waiver can help the airline industry get through the harsh wintertime and also go along the road of recovery.

This APD waiver could necessarily help in boosting the passenger demand in their industry by at least 12% in the coming 12 months.

What is APD tax?

APD tax, or Air Passenger Duty tax, is a tax that is added by the government on passenger flights in the UK. The tax adds about 13 more pounds to their airfares for passengers, for just an economy flight between the United Kingdom and Europe. However, when this APD tax is added to other kinds of flights, such as long haul flights in business class, then the additional price may amount to 170 pounds more.

How can reducing or removing APD tax be beneficial?

Heathrow has held a long-standing position that APD tax is unnecessary and a burden on competitiveness, investment, and tourism. The policy change would necessarily not impact transfer passengers flying on domestic routes.

The total cost savings that could be made by UK passengers could cause a potential increase in demands. Along with that, it could also stimulate up to an 8% increase in point-to-point demand on domestic routes (Heathrow) under a 100% reduction scenario. This could, potentially, equate to around 75,000 more round trips per annum. In the case of a 50% reduction scenario, the increase in demand could be seen up to 4%, which is equivalent to around 37,000 round trips.

By reducing the APD tax, not only do the domestic passengers get immense benefits, but passengers flying on local routes in the UK could also enjoy several benefits.

The reduction of APD tax can also reduce the cost of air travel expenses to and fro from other UK regions. Under the 100% reduction scenario, this could reduce the price up to 225 million euros per year. Under the 50% reduction scenario, it could see a reduction of 112 million Euro per annum.

What other benefits could be seen by reducing or wavering APD?

If the government were to waiver the APD taxes for at least a year, it could also enable several IT businesses as well as financial service sectors in Northern Ireland and Scotland’s main cities to retain their strong links with London, and even beyond. It could foster the trading of knowledge with the cost-efficient flights.

Not just that, this APD tax break could also improve the viability of newer domestic connections, as the cost of air travel for passengers would significantly reduce.

The proposal has been set in front of the UK Government, who will review it and inform the airline industry of their decision. Of course, it can be seen how this tax break can help in boosting passenger demand for domestic flights, and help out the airlines industry to overcome this unforeseen disaster. Although the Government aid provided to airports and airlines is being applauded, this move could be a lifesaver for the UK airline industry.

If your business is facing hardship or you are worried about debt or taxes, then we urge you to act as soon as possible.

Claims and disputes involving taxes are highly technical. Contact one of our proactive and professional commercial law solicitors now for expert legal advice.

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Finance

Albania Has Opportunity to Build a More Sustainable Growth Model

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Albania’s economy, like other countries in the region, is recovering faster than expected after the historic recession created by the COVID-19 pandemic. Following the contraction of the economy by 4 percent in 2020, GDP growth is projected to reach 7.2 percent in 2021, one of the highest among Western Balkans countries, says the latest edition of the Western Balkans Regular Economic Report, Greening the Recovery.

The strong recovery is supported by consumption, tourism, and construction. Going forward, growth is expected to moderate at 3.8 percent in 2022 and 3.7 percent in 2023.

Albania’s poverty rate is projected to fall below its pre-pandemic level by end-2021. Employment and labor force participation is also recovering, albeit with a lag, and real wages are increasing.

The recovery is contributing to fiscal revenue collection. Macroeconomic policies have supported the recovery, but higher spending has led to a further rise in the debt-to-GDP ratio. Economic uncertainty remains high, as the COVID-19 pandemic continues worldwide.

“The Albanian economy has shown encouraging signs of recovery in 2021,” said Emanuel Salinas, World Bank Country Manager for Albania. “As growth rebounds, Albania has the opportunity to strengthen the sustainability of its economic model and implement reforms that further support sustainable and shared growth, while preserving macroeconomic stability.”

The report shows that the Western Balkans region has improved significantly, with GDP growth now projected to reach 5.9 percent in 2021, after a 3.1 percent contraction in 2020. Growth in the region is projected at 4.1 percent in 2022 and 3.8 percent in 2023.

The poverty rate for the region is projected to resume its pre-pandemic downward trend and fall by around 1 percentage point to 20.3 percent, close to its 2019 level.

The regionwide recovery is due to strength in both domestic and external demand. A sharp rebound in domestic consumption and in travel across Europe helped boost remittances as well as tourism inflows during the 2021 peak summer season. A strong recovery in advanced economies also provided a boost to demand for the region’s exports.

However, the recovery remains fragile. Early warning signals from the labor market call for close policy attention. Job losses from the recession and its aftermath have disproportionately affected women and youth, which may set back efforts to raise the region’s perennially low rates of labor force participation. Youth unemployment in the region rose to 37.7 percent in 2021, up 5.4 percentage points from June 2020, further worsening youth employment prospects.

“As the Western Balkans countries look to a post-pandemic future, their policy approach will need to focus on addressing key impediments to job creation and economic transformation, including green transition,” said Linda Van Gelder, World Bank Country Director for the Western Balkans. “All six countries would benefit from reforms in the business environment, governance, and digitalization, which would contribute to growth and close the gap with EU countries.”

The report also looks at the macro-fiscal challenges and drivers of greening the region’s growth. The Western Balkans now find themselves at a key decision point regarding the impending green transition.

Global strides toward climate action are causing fundamental changes in society. Consumer and investor preferences are shifting, green technologies and new business models are disrupting more markets, and green policies are reshaping economic landscapes. As such, greening a country’s economy is becoming a decisive factor in international competitiveness and the ability to attract international finance and investments.

The Western Balkans are no exception. Still characterized by a development model tilted toward familiar brown industries, moving toward a green growth pathway is far from easy, especially in the short term. Yet, the green transition offers significant opportunities for the Western Balkans – including closer integration into Euro-centric global value chains and access to significant EU resources to help fund a green transition.

Effectively managing this green transition, including the many policy tradeoffs, will need to be a core focus of policy attention for the Western Balkans in the years ahead.

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Finance

Montenegro on Course for Stronger Economic Recovery in 2021

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The Western Balkans region is rebounding from the COVID-19-induced recession of 2020, thanks to a faster-than-expected recovery in 2021, says the latest edition of the Western Balkans Regular Economic Report, Greening the Recovery.

The outlook for the region has improved significantly, with GDP growth now projected to reach 5.9 percent in 2021, after a 3.1 percent contraction in 2020. Growth in the region is projected at 4.1 percent in 2022 and 3.8 percent in 2023.

Driven by a rapid recovery in tourism, Montenegro’s economy is projected to rebound strongly by an estimated 10.8 percent in 2021, the highest rate among the six Western Balkan countries. Strong peak summer season has supported a rebound in tourism revenues, which are likely to reach close to 75 percent of their 2019 levels, from 55 percent previously estimated.

The rebound of economic activity has boosted government revenues, which coupled with careful fiscal management have led to a reduction in fiscal deficit from 11 percent of GDP in 2020 to an estimated 4 percent in 2021. Maintaining fiscal prudence in the medium term will be critical, as uncertainties loom.

“The economic crisis brought on by the COVID-19 pandemic continues to be a source of uncertainty, but also presents an opportunity for Montenegro to ensure a resilient, inclusive, and green post-pandemic recovery,” says Christopher Sheldon, World Bank Country Manager for Bosnia and Herzegovina and Montenegro. “The World Bank is committed to helping Montenegro implement reforms that can help ensure macroeconomic stability, create economic opportunities, and spur strong private-sector led growth”.

The report finds that unemployment in Montenegro remains high as the recovery has not ignited the labor market yet, which limits the pace of resumed poverty reduction. Poverty is projected to decline slowly in 2021, but it remains higher than its 2019 level.

The poverty rate for the region is projected to resume its pre-pandemic downward trend and fall by around 1 percentage point to 20.3 percent, close to its 2019 level.

The regionwide recovery is due to strength in both domestic and external demand. A sharp rebound in domestic consumption and in travel across Europe helped boost remittances as well as tourism inflows during the 2021 peak summer season. A strong recovery in advanced economies also provided a boost to demand for the region’s exports.

However, the recovery remains fragile. Early warning signals from the labor market call for close policy attention. Job losses from the recession and its aftermath have disproportionately affected women and youth, which may set back efforts to raise the region’s perennially low rates of labor force participation. Youth unemployment rose to 37.7 percent in 2021, up 5.4 percentage points from June 2020, further worsening youth employment prospects.

“As the Western Balkans countries look to a post-pandemic future, their policy approach will need to focus on addressing key impediments to job creation and economic transformation, including green transition,” said Linda Van Gelder, World Bank Country Director for the Western Balkans. “All six countries would benefit from reforms in the business environment, governance, and digitalization, which would contribute to growth and close the gap with EU countries.”

The report also looks at the macro-fiscal challenges and drivers of greening the region’s growth. The Western Balkans now find themselves at a key decision point regarding the impending green transition.

Global strides toward climate action are causing fundamental changes in society. Consumer and investor preferences are shifting, green technologies and new business models are disrupting more markets, and green policies are reshaping economic landscapes. As such, greening a country’s economy is becoming a decisive factor in international competitiveness and the ability to attract international finance and investments.

The Western Balkans are no exception. Still characterized by a development model tilted toward familiar brown industries, moving toward a green growth pathway is far from easy, especially in the short term. Yet, the green transition offers significant opportunities for the Western Balkans – including closer integration into Euro-centric global value chains and access to significant EU resources to help fund a green transition.

Effectively managing this green transition, including the many policy tradeoffs, will need to be a core focus of policy attention for the Western Balkans in the years ahead.

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Finance

North Macedonia’s Growth Projected Higher, but Economy Still Faces Risks

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macedonia

The Western Balkans region is rebounding from the COVID-19-induced recession of 2020, thanks to a faster-than-expected recovery in 2021, says the latest edition of the Western Balkans Regular Economic Report, Greening the Recovery.

The outlook for the region has improved significantly, with GDP growth now projected to reach 5.9 percent in 2021, after a 3.1 percent contraction in 2020. Growth in the region is projected at 4.1 percent in 2022 and 3.8 percent in 2023.

The poverty rate for the region is projected to resume its pre-pandemic downward trend and fall by around 1 percentage point to 20.3 percent, close to its 2019 level.

The regionwide recovery is due to strength in both domestic and external demand. A sharp rebound in domestic consumption and in travel across Europe helped boost remittances as well as tourism inflows during the 2021 peak summer season. A strong recovery in advanced economies also provided a boost to demand for the region’s exports.

For North Macedonia, this translates into a growth projection of 4.6 percent for 2021, much higher than the forecast in spring. “This positive outlook is still surrounded by downside risks, with the pace of immunization low and supply chains still disrupted, while financial conditions have started tightening,” said Massimiliano Paolucci, World Bank Country Manager for North Macedonia and Kosovo.

However, the recovery remains fragile. Early warning signals from the labor market call for close policy attention. Job losses from the recession and its aftermath have disproportionately affected women and youth, which may set back efforts to raise the region’s perennially low rates of labor force participation. Youth unemployment rose to 37.7 percent in 2021, up 5.4 percentage points from June 2020, further worsening youth employment prospects.

“As the Western Balkans countries look to a post-pandemic future, their policy approach will need to focus on addressing key impediments to job creation and economic transformation, including green transition,” said Linda Van Gelder, World Bank Regional Director for the Western Balkans. “All six countries would benefit from reforms in the business environment, governance, and digitalization, which would contribute to growth and close the gap with EU countries.”

The report also looks at the macro-fiscal challenges and drivers of greening the region’s growth. The Western Balkans now find themselves at a key decision point regarding the impending green transition.

Global strides toward climate action are causing fundamental changes in society. Consumer and investor preferences are shifting, green technologies and new business models are disrupting more markets, and green policies are reshaping economic landscapes. As such, greening a country’s economy is becoming a decisive factor in international competitiveness and the ability to attract international finance and investments.

The Western Balkans are no exception. Still characterized by a development model tilted toward familiar brown industries, moving toward a green growth pathway is far from easy, especially in the short term. Yet, the green transition offers significant opportunities for the Western Balkans – including closer integration into Euro-centric global value chains and access to significant EU resources to help fund a green transition.

Effectively managing this green transition, including the many policy tradeoffs, will need to be a core focus of policy attention for the Western Balkans in the years ahead.

Continue Reading

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