Taxing aviation fuel in the EU: a brief guide

Taxing transport fuels is almost universal these days in road transport as a means to raise government revenues, pay for road infrastructure, discourage excess driving and more recently to limit climate impacts. Fuel (kerosene) used for international aviation (flights between separate countries) is, on the other hand, universally untaxed as a result of a myriad of intergovernmental air services agreements (ASAs) concluded over the past 50 years or so. These agreements were motivated originally by the view that aviation could help bring the world together after WWII and later promoted by industry association IATA and the UN aviation agency ICAO. Many countries nevertheless tax fuel uplifted for their domestic flights – the US, Australia, Brazil, Japan, India, Saudi Arabia and several countries in South East Asia.

Taxing aviation fuels in Europe was not permitted until the 2003 revision to the Energy Tax Directive enabled domestic aviation fuel to be taxed. Fuel uplifted for all other flights remained exempt but this provision could be waived for flights between two EU states subject to bilateral agreement.