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Today’s Top Headlines

ECJ: Irish Air Travel Tax Breaks Illegal

by Ulrika Lomas,, Brussels

26 December 2016

The European Court of Justice has ruled that Aer Lingus and Ryanair benefited from illegal state aid in the form of reduced air passenger tax rates.

The Court found that the airlines that were able to benefit from the reduced rate enjoyed a competitive advantage of EUR8 (USD8.36) compared with airlines that paid the standard rate. The Court has ordered Ireland to recover a sum of EUR8 per passenger for each of the flights concerned.

In July 2009, Ryanair asked the European Commission to examine the air travel tax imposed by Ireland on airlines. Ryanair alleged that some of its competitors had derived a financial advantage from the fact that they operated a significant number of flights to destinations located less than 300km from Dublin airport. For such journeys, the tax was set at EUR2 per passenger. Other flights departing from Ireland were subject to a rate of EUR10 per passenger.

In July 2012, the Commission concluded that the application of a lower rate for short-haul flights constituted state aid incompatible with the internal market. It ordered the recovery of that aid from the beneficiaries. It argued that the amount of aid corresponded to the difference between the lower rate of EUR2 and the standard rate of EUR10.

Aer Lingus and Ryanair challenged the decision before the General Court of the EU. In February 2015, the General Court partially annulled the Commission's 2012 decision on the ground that the Commission had failed to show that the advantages enjoyed by the airlines was, in all cases, EUR8 per passenger. The Commission then lodged an appeal with the Court of Justice.

The Court of Justice has now concluded that "the airlines that were able to benefit from the reduced rate enjoyed a competitive advantage of EUR8 by comparison with airlines that paid the standard rate."

It said: "The advantage in question did not consist in the fact that those airlines were able to offer more competitive prices than their competitors. It resulted quite simply from the fact that those companies had to pay a lower amount than they would have had to pay if their flights had been subject to the standard rate."

The Court added that "there was nothing to prevent the beneficiaries of the aid from increasing by EUR8 the price of their tickets that were subject to the lower rate so as to enjoy economic benefits corresponding to the difference between the lower and standard rates." It therefore rejected the argument put forward by Aer Lingus and Ryanair that as they were no longer in a position to recover the amount of EUR8 from their customers, their obligation to repay that sum would be equivalent to an additional tax or a discriminatory penalty.

TAGS: tax | European Commission | air passenger duty (APD) | Ireland | tax rates | European Union (EU) | Europe

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