European Airlines Condemn Another UK 'Tax' On Aviation

by Ulrika Lomas, Tax-News.com, Brussels

12 September 2008

The Association of European Airlines (AEA) is urging the UK government to reconsider its proposals to introduce Administrative Incentive Pricing for aeronautical spectrum used for navigation, communication, surveillance and air traffic management systems, arguing that the move is nothing but a 'stealth' tax on the already hard-pressed aviation industry.

The measures proposed by the UK Office of Communication are expected to raise around GBP60mn (EUR75mn) annually for the UK Treasury, but Ulrich Schulte-Strathaus, General Secretary of the AEA, whose 35 member airlines includes the most important network airlines in Europe, is of the view that Administrative Incentive Pricing is merely "a euphemism for a tax."

"The UK government evidently believes that in times of a downward economic cycle, fuel prices at unprecedented high levels and expected losses for international airlines in the years to come, the time is ripe for another tax. The opposite is true," he stated.

"After the notorious UK APD (air passenger duty), yet again a tax, this levy will make aviation even more costly in the United Kingdom, thereby reducing even further the competitiveness of UK based airlines and British airports," he warned.

Under Administrative Incentive Pricing, licences are sold to operators, such as airlines, by government regulators to promote greater efficiency in the use of the radio frequency spectrum, the idea being that users will return any unused spectrum rather than pay a charge. However, the AEA believes that the UK government has seen an opportunity to cash in on the industry's commitment to high safety standards "with yet another punitive tax."

According to Schulte-Strathaus, the proposal is an “ill-concealed attempt to hijack a safety issue as a means of additional revenues for the UK government.”

“Improved aeronautical radio spectrum efficiency will not be solved through additional taxation such as Administrative Incentive Pricing,” he contends.

“The additional tax will divert increasingly scarce airline revenues into the UK Treasury – and would no longer be available as necessary investments in new technology to improve the efficiency, including radio spectrum efficiency, of the European Air Traffic Management Systems. This tax would undermine the stated objective of Her Majesty’s government," he added.

"Instead of adding yet another tax on UK aviation, the UK government should support the full implementation of the Single European Sky which has an enormous environmental benefit. There are no excuses for the UK, and other European governments, to further delay the realisation of the Single European Sky project which is of crucial importance to European competitiveness in the global market place," Schulte-Strathaus concluded.

Recommended