Momentum is growing to end the decades-long tax tax break for international flights. Earlier this month the Netherlands pitched an EU aviation tax to the EU’s finance ministers. And new polling indicates people prefer a frequent flyer levy over other options to tackle climate change – including doing nothing.
One of Europe’s leading airlines has announced it is buying synthetic aviation fuel as a way of reducing its carbon impact. Lufthansa wants 5% of the fuel it uses at Hamburg airport to be almost zero-carbon over the next five years. It plans to use a near emissions-free alternative to kerosene produced with currently unclaimed renewable electricity from a local windfarm. T&E welcomed the initiative which will hopefully spur similar moves by governments and others in the aviation industry towards low and zero-carbon fuels.
The ink is barely dry on the EU’s revised renewable energy policy and already it is under threat from the aviation sector. That sector’s UN aviation agency, ICAO, known for its “spectacular lack of transparency”, is once more having a closed door meeting which risks clearing the way for the type of bad biofuels the EU has spent a decade trying to get rid of. And, on top of that, they are seeking to add “lower carbon” aviation fossil fuels as an option to cut aviation emissions.
Aviation is a major source of emissions, increasing 21% within Europe in the last three years, and is projected to continue to grow. If Europe is to meet its climate targets action is needed and fiscal policy has a key role to play. To date all aviation fuel used in Europe has been tax exempt despite such taxation being permitted on European domestic flights and intra-EU since 2003, the latter subject to bilateral agreements.
EU countries can end the decades-long exemption and tax kerosene on flights between them, according to legal experts. This could either be done at EU level through a series of bilateral agreements or by agreement between individual countries, the independent legal analysis for green NGO federation Transport & Environment (T&E) finds. The old argument that foreign carriers’ operating within the EU – de facto a small number of flights – can’t be taxed can be overcome by introducing a de minimis threshold below which fuel burn would not be taxed.
This paper will consider the legal possibilities for imposing a tax on the fuel used in EU member states' domestic aviation. It will consider the relevant treaties and laws: the Chicago Convention, the EU ETS, the Energy Taxation Directive, and the Excise Duty Directive. It reaches the conclusion that taxation can be imposed on fuel used in domestic aviation without legal impediment. It should be noted at the outset that this question has been considered before by the UK Parliament and by Prof Eckhard Pache for the German Federal Environment Agency, both of which came to the conclusion that taxing domestic aviation fuel in the EU was perfectly legal.
Taxing flights rather than tickets is a more effective way of addressing the growing environmental impact of air transport. That is the conclusion of a study commissioned by T&E into the under-taxation of aviation and the legal obstacles facing efforts to charge for the environmental costs of flights.
Flight ticket taxes which were first introduced to compensate for revenue lost due to aviation’s VAT exemption can be restructured to deliver greater environmental benefits, a new independent study has found. From taxing the carbon content of fuels to charging planes based on their fuel efficiency, EU governments have several options to encourage airlines to reduce their environmental impact while still raising money to allow tax cuts for citizens and improve public services, the report for green transport group Transport & Environment (T&E) said. More than half the EU aviation market is subject to ticket taxes.
Aviation has a unique taxation regime that is characterised by a lower level of taxation than many other economic activities. The low-tax regime is supported by a number of interacting national, European, global and bilateral rules and agreements.
Hosted by Julie Girling (EPP) and Seb Dance (S&D)
Welcome and Introduction: Julie Girling MEP