Aviation Industry Slams New Development Levy Proposal

by Ulrika Lomas, Tax-News.com, Brussels

03 March 2006

The International Air Transport Association (IATA) has urged governments to reject French President Jacques Chirac's proposal for a global tax on aviation to fund development.

Under the French proposal, which will come into force in France from July 2006, taxes on air travel will range from EUR1 to EUR 40 depending on distance travelled and type of ticket.

Thirteen countries including Brazil, Britain, Chile, Congo, Cyprus, France, Ivory Coast, Jordan, Luxembourg, Madagascar, Mauritius, Nicaragua, and Norway have formed an alliance to adopt a levy on plane tickets to help poor countries fight AIDS and other killer diseases, despite resistance from airlines.

However, the proposal faces strong opposition from many countries, including the United States and European countries which rely heavily on foreign tourism, such as Greece, Italy and Spain.

An additional 25 countries have pledged to contribute to a central fund created by the core group of 13, although they will not be imposing the airline travel tax directly. This fund will be used to purchase generic drugs and other medicines to help combat disease in developing nations.

However, according to Giovanni Bisignani, IATA's Director General and CEO, many developing countries depend on the aviation industry as a major source of employment and tourism income, and he argued that making air travel more expensive "is akin to to biting the very hand that feeds development".

"Airlines make a massive contribution to development by bringing tourists to destinations and transporting goods to markets," Mr Bisignani observed.

"Even those countries that this initiative is supposed to help are opposed to the tax," he added.

Mr Bisignani pointed out that the African Union has urged its member states to oppose the imposition of taxes that would add to the cost of air transport.

"They rightly recognise aviation's contribution to their economies," he stated.

IATA, which brings together approximately 265 airlines, claims that air transport generates 470,000 jobs in Africa and contributes US$11.3 billion to African GDP. It also says that growth in passenger traffic is rising faster in Africa than anywhere else, with the 9.9% that Africa enjoyed in 2005 compared with a global average of 7.6%.

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