EU governments miss out on up to €39bn a year due to aviation’s tax breaks

The report, conducted by environmental consultancy CE Delft for sustainable transport group Transport & Environment (T&E), found that this important revenue shortfall is due to out-dated EU laws [1] exempting international flights from fuel taxes that do, however, apply to other modes of transport such as road transportation and from VAT, which is levied on almost all consumer goods.

While every European consumer, small business and haulier has to pay on average a tax of 48 eurocents per litre of fuel whenever they fill up their vehicles, big commercial airlines both those based in the EU and overseas don’t pay a single penny of tax on their fuel. This revenue shortfall totals up to €32bn a year.

In addition to this, EU governments are missing €7.1bn every year on VAT which is exempt on international flight tickets [2].

T&E’s aviation policy officer Aoife O’Leary said: “International airlines are like flying tax havens inexplicably exempted from paying the basic EU taxes every EU citizen and company is obliged to. We all have no option but to pay VAT on the goods we buy, and the fuel tax when we fill up our cars. But somehow it is OK and lawful for airlines to be let off the tax hook just like Starbucks and Amazon, especially when studies show that the vast majority of customers of the airlines  come from the financially well-off. Cash-strapped EU governments should seize the opportunity, collect this low-hanging fruit and generate revenues badly needed to cover their budget deficits.”

Air travel is the most climate-intensive means of transportation, responsible for  5% of global warming. Its greenhouse gas emissions are set to grow at 4-5% a year globally with no sign of that figure being reduced. Despite aviation’s environmental harm, EU governments find it acceptable to subsidise this growth while, on the other hand, they try to legislate to combat its perverse climate effects. On top of the taxbreaks mentioned, EU countries also hand out over €3bn a year to the industry to artificially expand demand through building new runways or cutting airport costs.

“These tax breaks and subsidies amount to a government license to heat the planet. These are the same airlines that oppose the EU’s climate change legislation for aviation. The subsidies also unfairly give airlines a competitive advantage vis-à-vis other modes of transport and exacerbate financial deficits having deep social effects. We urge EU Member States to stop subsiding the polluting expansion of aviation,” Aoife O’Leary concluded.