T&E letter in the Financial Times: End airlines exemption from fuel tax

Full text of the letter:

Before the EU starts work on a carbon border tax as Dieter Helm suggests, it would do well to simply get rid of a few glaring tax exemptions on the most carbon-intensive industries.

One such industry is aviation: free of both fuel taxes and value added tax in the EU yet by far the most carbon-intensive form of transport. There is an opportunity to right both wrongs this year as the European Commission is set to review both the energy taxation and VAT directives.

Meanwhile, three major airlines are currently attacking the planned inclusion of aviation in the EU’s emissions trading scheme through the courts. The impact of bringing aviation into the ETS is equivalent to 1 cent on a litre of kerosene. That looks absurd compared with the average 46 cent tax on petrol and diesel in the EU. Plenty of room then for the commission to set a minimum level of kerosene tax as it already does for road fuel.

As for VAT, the current exemption is blatantly unfair, and makes EU climate policy needlessly inefficient. The European Commission said in 2005 that the VAT derogation covering airline tickets should be abolished. Five years ago it was a smart idea; in the current economic climate it’s a no-brainer.

Click here to read the letter on the FT website.