Airlines' lobby group calls for removal of 'unreasonable' taxes

Airlines' lobby group calls for removal of 'unreasonable' taxes

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The Airlines for Europe lobby group is demanding that European governments remove “unreasonable” taxes such as Air Passenger Duty in the UK.

The call came ahead of plans by the Norwegian government to impose an air transportation tax equivalent to NOK 80 (€8.5) this summer on departing passengers for both domestic and international flights.

The tax risks reducing the overall demand for air transport by 5%, which equals roughly 1.2 million passengers a year, Iata estimates.

The tax would also lead to a reduction in the direct and indirect output of the aviation sector by an estimated NOK 1.4 billion (€150 million).

The Italian government hiked the taxes on passengers charged at Italian airports by €2.50 earlier this year without warning, prompting some A4E member airlines to remove aircraft from the country.

Air travel taxes threaten tourism, jobs and the ability to do business in Europe, A4E argues.

It wants the European Commission to take a public stance to encourage national measures which support aviation activity together with tourism and business activity.

A4E cited economic analysis by PwC showing that the removal of UK Air Passenger Duty would boost British GDP by 1.7% and create 60,000 new jobs by 2020.

Scotland plans to cut APD by 50% as a precursor to total abolition. The tax is said to cost Scotland £200 million a year in lost tourism alone. 

Slashing APD in Scotland will add £1 billion to the local economy and create 4,000 jobs, according to studies from Edinburgh airport.

APD would cost the Scottish economy up to £68 million in lost tourism expenditure every year by 2020 if it was not reduced.

The Irish government’s removal of traffic tax in April 2014 triggered traffic growth at the country’s airports and an 8% increase in tourism last year while the number of Northern Ireland residents flying from Dublin increased by 52% in the first year.

The call for action over airline taxes came as A4E executives participated in an aviation briefing organised by MEP Ramon Tremosa i Balcells.

The group’s managing director, Thomas Reynaert, said: “By weakening an enabler of economic activity, governments are shooting themselves in the foot: they only see the short term budgetary gains but ignore the larger and long-term impact on economic activity.

“By removing passenger taxes governments would end up as net beneficiaries due to the increased revenues from VAT and other taxes, as well as higher passenger numbers.”

Barcelona MEP, Tremosa i Balcells, said: “As an economics professor before being a politician, I believe that what is important for airlines, like any other business, is to have full transparency and predictability on taxation decisions at member states level.

“I ask the European Commission to publicly list these taxes and levies and to examine their economic impact. The EU should be much more active in the co-ordination of member states’ tax policies.”

Norwegian chief executive Bjørn Kjos said: “We encourage European legislators to learn from prior experiences. The Dutch government abolished its aviation tax after just one year. It recognised the detrimental effect its tax was having on the wider economy as travellers bypassed Dutch airports and airlines in favour of cheaper options across the border in Germany or Belgium.”

Ville Iho, Finnair’s deputy chief executive, added: “The imposition of such taxes impacts airlines’ decisions to operate from a specific country or region due to the high price elasticity of consumers.

“This subsequently affects the offer to consumers who are faced with a decrease in operations and a reduction of connectivity which has a shattering effect on the economy.”

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