IATA Slams Canadian Aviation Taxes

by Mike Godfrey, Tax-News.com, Washington

21 January 2011

The International Air Transport Association (IATA) has called on the Canadian government to improve its global competitiveness in air transport, travel and tourism by working with the country's aviation industry to address issues such as taxation, regulation, security and the environment.

“Air transport is key to Canada’s economy. Canada is a great place to visit and to do business, but the country is losing its competitive edge. Canada needs a comprehensive strategy to keep it competitive in the world market,” said Giovanni Bisignani, IATA’s Director General and CEO. His comments were made in an address on the short- and long-term opportunities for Canadian aviation, to the Montreal Council on Foreign Relations.

Bisignani noted that Canada fell from the 8th most visited country in the world in 2002 to the 15th in 2009. The World Economic Forum’s Travel and Tourism Competitiveness report ranks Canada at 106 in terms of cost competitiveness, behind Japan (86), the United Arab Emirates (50), India (46) and China (20). “Aviation is the engine for tourism, which accounted for 650,000 Canadian jobs and CAD71bn (USD71bn) in spending in 2009. But instead of having policies to welcome more visitors, Canada’s excessive taxes turn them away. Compared to the United States, a visit to Canada is CAD160 more expensive,” said Bisignani.

Bisignani took aim at Canada’s unique system of Crown rents as one of the root causes of weak cost competitiveness. “Canada has good airports, but the CAD257m annual Crown rent bill is an unnecessary competitive disadvantage. No other country in the world has such a system. It discourages visitors and encourages Canadians to start their air travels from the United States. It’s time to abolish it,” urged Bisignani.

He also said that governments around the world are too involved in the industry and are preventing airlines from operating like other industries. “Airlines need the freedom to consolidate wherever it makes business sense. Airlines that facilitate globalization are stunted national businesses because of government protection. The industry is structurally sick and traditional leaders like Canada will be challenged to improve competitiveness with change and innovation. Too often governments try to live off past glory by protecting the status quo and avoiding change. The challenge for Canada and governments around the world is to improve competitiveness on a level playing field that allows airlines to compete profitably like any other business.”

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