The boss of a travel technology company is calling for current ATOL protection scheme to be scrapped and replaced with Air Passenger Duty.
Multicom MD John Howell believes the "exorbitant" APD is essentially a "holiday tax" and should be used to protect customers from airline failures.
His renewed call comes after the Air Travel Insolvency Protection Advisory Committee (ATIPAC) highlighted the major loophole in the proposed changes to the European Package Travel Directive.
Under the current proposals, companies are able to simply relocate outside the European Economic Area (EEA) to avoid the planned legislative changes.
Howell said: "As currently drafted the European PTD is fundamentally flawed if companies follow Lowcostholidays’ initiative and relocate outside of the EEA.
"It will also be a useless directive in a global market where more and more businesses located outside the EU are looking to grow their share of package holiday sales in the UK and other European markets.
"Additionally, the current ATOL regulations are bad for business and are unfair due the imbalance of costs between airlines and agents.
"However, we already have a system in APD that generates millions each year for the government and that money should be ring fenced to underwrite the costs via the CAA when an airline fails.
"It makes sense, flight only and package bookings are covered by APD which is in reality a holiday tax and that would allow action to be taken quicker and ensure that the airlines are the ones that pay as they are the ones that go bust.
"In one simple move the whole complicated system and flawed directives could be removed and replaced by a simple and workable solution that already exists.
"That surely has to be a better solution than what is currently proposed in the PTD?"
But a spokesman for ABTA said ATOL reform should focus on the new European PTD.
"ABTA supports the sentiments expressed about the current high levels of APD and will continue to work with industry partners to have APD frozen until a proper economic impact assessment is carried out by HM Treasury," he said.
"We have also been long-term advocates of EU action on airline insolvency. However, implementation of a revised ATOL reform should be addressed following, and taking into account a new European Package Travel Directive. Ensuring a favourable outcome of the PTD is ABTA’s immediate focus."
