Judge urged to scrap the £2 billion air tax

Package holiday firms launched a judicial review, claiming that the Air Passenger Duty, which critics have nicknamed the 'poll tax of the skies', was illegal under European law.

If successful, the Government could be forced to pay refunds to millions of passengers who have already had to pay the levy.

The legal battle follows Mr Brown's decision to double the tax to £10 for economy and short-haul flights, £40 for economy long-haul and £80 for longer business and first-class trips, on the grounds that air travel emissions are fuelling climate change.

Families going on holiday and business travellers have been hardest hit by the increases, which were introduced in February, just seven weeks after they were announced by the then Chancellor.

The Federation of Tour Operators, which speaks for the biggest names in UK holiday travel including Thomson, First Choice and Thomas Cook, urged a judge to order that the Government scrap the whole tax, which is worth £2 billion a year to the Treasury.

Alternatively, they want a refund of the cost of implementing the recent increase - estimated at £50 million.

Lawyers for the group told the court that the levy breaks a European law that stipulates that taxes can be levied on flights only if they are in return for services provided by the Government, such as security.

The group also claimed its human rights were compromised by the rushed increase in the duty because its members were forced to introduce it at such short notice, which it claims cost them around £50 million.

The tax was also said to contravene the Treaty of Rome which enshrines freedom of trade within the European Union.

If the judge rules that the duty is illegal he is likely to ban it, and could order the Government to refund airlines and passengers who have been made to pay it.

Outside court, Andy Cooper, director general of the FTO, dismissed the Government's claim that the levy was an environmental tax as 'greenwash'.

He said: 'This is a controversial stealth tax. Air Passenger Duty was not introduced nor intended as an environmental measure and indeed its impact is perverse.

'As a tax levied on passenger numbers, not aircraft, it penalises environmentally friendly airlines with high load factors and rewards those with half-empty flights.

'The legal action is primarily directed at the way the Government chose to introduce new Air Passenger Duty rates which has forced us to use all means possible to defend the sector from the entirely avoidable consequences.'

Charles Haddon-Cave, QC, for the FTO, told the court that tour operators were shocked by the doubling of the tax.

The federation's members - 12 major tour operators which annually account for 15 million package holidays, or 65 per cent of the UK market - had already agreed bookings for four million package holidays which attracted the higher rate when the increases bit.

Unlike airlines, they were prevented by law from asking their customers to pay surcharges to meet the unexpected new costs.

This left them with an additional tax burden of 'something approaching £50 million', said Mr Haddon-Cave.

The judicial review is expected to continue until tomorrow, with a verdict likely at the end of the month.

• Advertising watchdogs have rapped Ryanair for mocking Mr Brown over the duty.

A national newspaper advertisement run by the budget airline claimed that Mr Brown had 'fleeced' holidaymakers in an air passenger tax 'deception', adding: '£1billion just disappears into greedy Gordon's pockets.'

It continued: 'Not a penny spent on the environment, aviation accounts for just 2 per cent of CO2 emissions and yet he pulled it off - unbelievable.'

The Advertising Standards Authority upheld complaints that the claims were misleading because the airline could not prove the Government had not spent - or did not intend to spend - any revenue from air passenger taxes in this way.