Unlike road transport, which is subject to several taxes, aviation is not subject to fuel tax or consumption (value-added) tax. The 1944 Chicago Convention, which governs international air transport, has often been quoted as preventing taxes on aircraft fuel, but a T&E study in 1995 showed this was not the case, and subsequent legal judgements have confirmed this. However, subsequent bilateral agreements between states have exempted kerosene from taxation – resulting in an effective subsidy for aviation, which is partly responsible for the rapid growth of air transport and emissions from planes.
Since the 1990s, quite a few EU countries have levied taxes on plane tickets, some of which have been challenged in courts. Now a study by the Dutch consultancy CE Delft for T&E looks at what conclusions have come from these legal challenges, and says ticket taxes can be modified to have a greater environmental impact by taking into account emissions and flight distances.
It concludes that an aviation ticket tax in Europe is lawful if it is not linked to fuel consumption and if it does not differentiate rates within the EU. It also says levying aviation taxes through tickets is legitimate, but taxing the impact of the flight rather than departing passengers is a preferable basis for ticket taxes. It says: ‘A ticket tax with a single rate is a rather blunt way to internalise externalities as it does not take the actual environmental impacts of a passenger on a specific flight into account. If flight taxes were differentiated with regards to the environmental impact, the transport system would become more efficient and an additional incentive to reduce the impacts would be provided.’
It therefore proposes four variations of a ticket tax: one based on lifecycle emissions of the fuel used, one based on NOx emissions, one judged by distance flown, and a hybrid of an aviation tax and a climate impact charge.
T&E’s aviation director, Bill Hemmings, said: ‘With international efforts to tackle aviation’s contribution to climate change once again slowed down by ICAO’s weak “Corsia” initiative, it is left to Europe to provide some ideas on internalising air transport’s unpaid costs. The fundamental need is for the price of aviation to send a strong incentive to airlines to use cleaner aircraft and have the highest possible loads of passengers and cargo.’
The study says that ‘per flight taxes’ provide better emissions reduction incentives for airlines than ticket taxes, but as per flight taxes have not been introduced, any potential legal obstacles have not yet been tested in a court of law.