Aviation taxation and subsidies

Aviation taxation and subsidies includes taxes and subsidies related to aviation.

An Airbus A380 departs. Aviation taxation and subsidies affect the prices of airline seats

Taxation is one of several methods to mitigate the environmental impact of aviation.

Types of taxes
  • Airport improvement fee, paid by passengers to the airport or government
  • Air passenger taxes, paid by passengers to the government for environmental reasons; may be variable by distance and includes domestic flights
    • Departure tax, paid by passengers leaving the country to the government (sometimes also applies outside of aviation)
  • Jet fuel tax, paid by airline companies to the government for the jet fuel (kerosene) they burn
  • Landing fee, paid by airline companies to the airports they land on
  • Solidarity tax on airplane tickets (Chirac Tax), paid by passengers to Unitaid, a global health initiative against HIV/AIDS, malaria and tuberculosis

Fuel taxes

According to the Amsterdam-based international environmental organisation Friends of the Earth (2005), aviation does not pay tax on fuel and aviation's expansion is fuelled by its exemption from taxes. In the UK, aviation got £9 billion tax free benefits in 2003. Friends of the Earth argued that fuel tax would give incentive to improve the energy efficiency of operations, and would be a more effective response than emission trading.[1]

European Union
Further information: Kerosene tax
Air passenger taxes in Europe.
  Has air passenger taxes
  Will introduce air passenger taxes
  No taxes, but supports EU-wide taxes
  No longer has air passenger taxes
  No air passenger taxes

Historically, EU aviation fuel was tax free and applied no VAT. Domestic fuel taxation in the EU was permitted from 2003 by the Energy Taxation Directive (2003/96/EC) and on intra-EU with bilateral agreements. In 2018 Germany applied 19% VAT on domestic airline tickets. Air fuel tax 33 cents/litre equal to road traffic would give €9.5 billion in the EU. Applying a 15% VAT in all air traffics within and from Europe would be equal to €15 billion.[2]

In November 2019, the Finance Ministers of Belgium, Bulgaria, Denmark, France, Germany, Italy, Luxembourg, the Netherlands and Sweden presented a joint statement calling on the European Commission, more specifically European Commissioner for Climate Action Frans Timmermans, to introduce EU-wide taxes on aviation so as to charge the entire aviation industry more for its emissions and pollution, and put all member states on level pegging. Citing the fact that aviation causes around 2.5% of global CO2 emissions, the Ministers proposed both uniform air passenger taxes as well as kerosene taxes (both excise duties and VAT).[3][4]

Austria
Austrian distance tax categories (2018):
  Category 1: 3.50 euros
  Category 2: 7.50 euros
  Category 3: 17.50 euros

Austria introduced a Flight Tax Act (Flugabgabegesetz, FlugAbgG) in April 2011[5] similar to the German aviation taxation system. In 2013, the fees for short and medium-haul flights were reduced from 8 euros to 7 euros and from 20 euros to 15 euros respectively, and halved again in 2018. According to §5.1 of the Flight Tax Act, the flight tax depends on the distance to the destination airfield per passenger:[6]

  • for short distances 3.50 euros
  • for medium distances 7.50 euros
  • for long distances 17.50 euros

During the COVID-19 pandemic, airlines in Europe had to temporarily cease most operations and had requested a total of 12.8 billion euros in government support by mid-April 2020, according to a Transport & Environment, Greenpeace and Carbon Market Watch report. At the time, Austria was the only country – through Minister of Climate Action, Environment, Energy, Mobility, Innovation and Technology Leonore Gewessler (Greens) – insisted that a government bailout of its flag carrier Austrian Airlines (which had about 7,000 employees[7]) should be linked to climate targets.[8] On 8 June 2020, the Austrian conservative–green coalition government concluded a support deal for Austrian Airlines (a subsidiary of Lufthansa) for 150 million euros in taxpayer grants, and 300 euros in banking loans that are to be paid back. This was significantly less than expected (Austrian Airlines had applied for 767 million euros), and came under the following conditions:[9][10][7]

  • All airline tickets got an immediate uniform 12 euro environmental tax. This altered an earlier plan to introduce a flight ticket tax system of 3.50 to 17 euros (depending on the route) in 2021.[9]
  • All airline tickets cost at least 40 euros in total.[7] This ended the practice of selling tickets as cheap as 10 euros (for example by Ryanair's Austrian subsidiary Lauda, which offered 100,000 tickets for 9.99 euros in 2019; other such cheap airlines in Austria include EasyJet and Wizz Air) in order to discourage flying in general.[9]
  • For flights less than 350 kilometres away, a special tax of 30 euros must be paid to discourage short flights (an unprecedented environmental measure in the EU).[9]
  • Airline connections that covered distances that could be travelled within three hours by train were prohibited.[9]
  • Austrian Airlines had to reduce its CO2 emissions by 50% by 2030[7] (or by 33% by 2030 compared to 2005).[9]

France

On 9 July 2019, French transport minister Élisabeth Borne accounced that France would introduce an eco-tax on passengers in 2020. Flights within the EU, including domestic flights, would be taxed 1.5 euros for economy class and 9 euros for business class, while flights out of the EU would be charged with 3 euros for economy class and 18 euros for business class. Different rules apply to Corsica and other overseas departments and territories of France. The exo-tax was projected to produce 180 million euros in revenue annually.[11]

On 9 June 2020, during the COVID-19 pandemic in France, economy and finance minister Bruno Le Maire announced a financial support programme for the aerospace sector for 15 billion euros. It included the earlier announced bailout of its flag carrier Air France–KLM at 7 billion euros (comprising a state loan of 3 billion and bank loans of 4 billion), with conditions to transform it into the 'most environmentally friendly airline on the planet'. There were several aims, including the protection of 300,000 direct and indirect jobs (100,000 of which were said to be at risk within 6 months), a gradual recovery of the 34 billion annual trade surplus that the French aviation industry produced, and the goal of developing carbon-neutral air travel by 2035 rather than 2050 (for which the civil aviation research council CORAC would receive €1.5 billion in support over three years).[12]

Germany
German distance tax categories:
  Category 1: 12.90 euros
  Category 2: 32.67 euros
  Category 3: 58.82 euros
Main article: German air passenger taxes

Germany's air passenger tax is divided in three categories, with the following taxes since 1 April 2020:[13]

  • Category 1 – Europe, Russia, Turkey, Morocco and Algeria: 12.90 euros
  • Category 2 – Central Asia, the MENA region (excluding Morocco and Algeria, including Afghanistan and Pakistan), Sahel region: 32.67 euros
  • Category 3 – Other countries: 58.82 euros

Ireland

The Republic of Ireland had an Air Travel Tax from 2009 until April 2014.

Netherlands

On 1 July 2008, the Fourth Balkenende cabinet introduced an aviation tax (vliegbelasting or vliegtaks) of 11.25 euros per ticket for flights within Europe and 45 euros for destinations outside Europe.[14] Due to vehement opposition by the aviation industry and travel agencies, the tax was abolished a year later on 1 July 2009, leading to heavy criticism from academia and environmental organisations. Amsterdam Airport Schiphol claimed it lost 900,000 passengers to airports abroad due to the tax, but Vrije Universiteit Amsterdam economist Eric Bartelsman pointed out that the Great Recession reduced air travel across the world, not just in the Netherlands. Tilburg University economist Lans Bovenberg was more positive, arguing aviation taxes should be implemented simultaneously across the entire EU to be effective, and that taxing jet fuel would be a more effective measure than taxing passengers.[15]

In 2017, the Third Rutte cabinet coalition agreement planned to introduce a new aviation tax of 7 euros on every ticket, regardless of destination, on 1 January 2021.[14] Cargo aircraft will pay a tax based on their weight and noise pollution class:[14] up to 3.85 euros per tonne of cargo, with a lower rate for quieter aircraft.[11] The tax, which is projected to produce an annual revenue of 200 million euros, has four goals: reducing CO2 emissions, reducing other emissions such as particulates, reducing noise pollution, and preventing a jet fuel tax.[14] The new plan is more likely to succeed because the tax is much lower than in 2008, and most neighbouring countries except Belgium had also introduced aviation taxes in preceding years, making passengers' tax circumvention efforts unlikely.[14] The government was aiming to eventually establish a uniform EU-wide aviation tax.[14]

Sweden
Swedish distance tax categories:
  Category 1: 62 kronor
  Category 2: 260 kronor
  Category 3: 416 kronor

Sweden introduced a passenger tax for commercial flights of more than ten passengers in April 2018.[11] As of 2020, Swedish aviation taxes for passengers were divided into three categories, depending on the destination:[16]

In November 2019, the Swedish government of Stefan Löven (Löfven I Cabinet) proposed to collect an annual aviation tax of around 78 million euros.[17] Under the proposal's conditions, the Swedish aviation industry would still be 100% exempt from the Swedish energy tax, carbon dioxide tax and sulphur tax that other companies pay.[18]

Other countries

Australia
Main article: Passenger Movement Charge

Norway

Norway introduced airline passenger fees on 1 June 2016. From 1 June 2016 to 31 March 2020, the fee was 80 Norwegian kroner per passenger. On 1 April 2020, the fee was changed to 75 kroner for passengers with a final destination in Europe and 200 kroner for passengers with a final destination outside Europe. In addition, VAT was added to the tax.[19]

Switzerland

In June 2020, the Swiss Federal Assembly approved a proposal (passed by the Council of States in 2019) to introduce an environmental levy of 30 to 120 Swiss francs per airline ticket 'depending on distance and [travel] class'; nearly half of the proceeds are to flow into a climate fund for emissions-reduction initiatives.[20]

United Kingdom
Main article: Air Passenger Duty
See also: Air Departure Tax

United States
Main article: Fuel taxes in the United States § Aviation fuel taxes

In the United States, most states tax avgas and jet fuel.

Subsidies

Some governments subsidize airports and passenger customs costs within airports.

The EU Commission in 2014 ruled that subsidies Ryanair received from a regional authority a decade ago had to be repaid (€525,000).[21]

In June 2020, Flemish Economy Minister Hilde Crevits decided that trainings for airplane and helicopter pilots would no longer be subsidised in Flanders from 1 July 2020 onwards.[22]

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References
  1. Aviation and the economy Friends of the Earth 2005
  2. Taxing aviation fuels in the EU Jasper Faber and Aoife O’Leary Delft November 2018
  3. Jonas Ekblom (7 November 2019). "Nine EU countries call for European aviation tax to curb emissions". Reuters. Retrieved 13 June 2020.
  4. Emanuela Barbiroglio (11 November 2019). "There Are Now Nine Countries Asking For An EU Aviation Carbon Tax". Forbes. Retrieved 13 June 2020.
  5. Gesamte Rechtsvorschrift für Flugabgabegesetz in the Rechtsinformationssystem der Republik Österreich.
  6. Flugabgabegesetz in the Rechtsinformationssystem der Republik Österreich.
  7. "Oostenrijk verbiedt vliegtickets onder 40 euro". NOS Nieuws (in Dutch). Nederlandse Omroep Stichting. 9 June 2020. Retrieved 13 June 2020.
  8. Sandra Laville (22 April 2020). "Coronavirus: airlines seek €12.8bn in bailouts without environmental conditions attached". The Guardian. Retrieved 13 June 2020.
  9. Gerhard Hegmann (9 June 2020). "Österreich verbietet die 9,99-Euro-Billigstflüge". Die Welt (in German). Retrieved 13 June 2020.
  10. Alexandra Schwarz-Goerlich (8 June 2020). "Lufthansa's Austrian arm gets 450 million euro government bailout". Reuters. Retrieved 13 June 2020.
  11. Frances Lopez (11 July 2019). "Aviation tax: Which EU countries charge passengers?". Euronews. Retrieved 13 June 2020.
  12. David Kaminski-Morrow (9 June 2020). "French government puts jobs and environment first in €15bn aerospace bailout". FlightGlobal. Retrieved 13 June 2020.
  13. Verordnung zur Absenkung der Steuersätze im Jahr 2020 nach § 11 Absatz 2 des Luftverkehrsteuergesetzes (Luftverkehrsteuer-Absenkungsverordnung 2020 – LuftVStAbsenkV 2020). Buzer.de. Retrieved 13 June 2020.
  14. Niels Markus (11 March 2020). "Het kabinet weet het zeker: de vliegtaks gaat deze keer niet mislukken". Trouw (in Dutch). Retrieved 13 June 2020.
  15. "Gemengde reacties op afschaffing vliegtaks". Nu.nl (in Dutch). 25 March 2009. Retrieved 13 June 2020.
  16. "Så beräknas skatten" (in Swedish). Swedish Tax Agency. Retrieved 13 June 2020.
  17. Swedish government proposals 2019
  18. "Budget change, spring 2019" (PDF) (in Swedish). p. 28. Retrieved November 21, 2019.
  19. "Flypassasjeravgiften". NRK (in Norwegian). 2 June 2020. Retrieved 13 June 2020.
  20. Cirium (11 June 2020). "Swiss parliament votes for CO2 tax on air tickets". FlightGlobal. Retrieved 13 June 2020.
  21. France grounds Ryanair plane to force subsidy repayment France24 09/11/2018
  22. "16 opleidingen uitgesloten van de kmo-portefeuille". vlaio.be (in Dutch). Vlaams Agentschap Innoveren & Ondernemen. 12 June 2020. Retrieved 14 June 2020.
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