Air ticket tax for Germany as government looks to balance budget

The German government has announced it is to introduce a tax on international air tickets. The move would make it the fourth western European nation following France, Great Britain and Ireland to have an aviation ticket tax.

Sketch of some documents (default image for news

[mailchimp_signup][/mailchimp_signup]The news was somewhat buried in a package of measures announced by the German government, aimed at saving €80 billion by 2014. The package was presented as the biggest austerity package since the modern German state was founded in 1949. Other measures include a tax on nuclear power plant operators, and massive cuts in public spending.

Exact details of the air ticket tax are still difficult to find, but the governing CDU/CSU/FDP coalition is banking on earning €1bn per year from 2011, which means a levy of €15 on all passengers leaving German airports on international flights. Domestic tickets are exempt as Germany already charges value-added tax on flights within the country.

The ticket tax is intended to be differentiated according to various criteria, including price, noise and fuel consumption, with the details to be worked out by the transport, finance and environment ministries. The Free Democrats, who are the junior partners in the coalition, say the ticket tax is a temporary measure and will only be levied until aviation enters the EU’s Emissions Trading System (ETS). But this is due to happen in 2012, the coalition is working on the basis of revenues for the period 2011-14, and an environment ministry spokesman later said the ticket tax would continue in parallel with the ETS.

T&E gave a cautious welcome to the move, and the progress it makes towards ending the VAT subsidy air tickets still enjoy. ‘Germany is playing catch-up,’ said T&E policy officer Bill Hemmings.  ‘The British, French and Irish have all had ticket taxes for a while, to make up for the lack of VAT on international tickets.  Other governments across Europe should be doing the same; it’s far smarter to close this loophole than to raise taxes on labour, for example.’

The German decision will facilitate similar moves by the new Dutch and Belgian governments. A Dutch air ticket tax was abandoned last year after strong lobbying by industry.

Hemmings added, ‘Although governments tend to promote ticket taxes for environmental reasons, they should primarily be seen as a step to roll back the VAT giveaway on air tickets. The industry has no reason to complain about being treated in exactly the same way as everybody else. We urgently need to level the playing field.’

T&E has consistently argued that aviation’s entry into the ETS in 2012 will only reduce aviation emissions by a few per cent, and that ending air travel’s exemptions from VAT and fuel taxation remains crucial. Even with ticket taxes, the aviation sector falls a long way short of paying for all its external costs.