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Abolishing Aviation Tax Would Boost German Economy, Says Report

by Ulrika Lomas, Tax-News.com, Brussels

25 October 2017


A new study by PwC has concluded that abolishing Germany's flight ticket tax would provide a substantial boost to the German economy.

The report, commission by European airline industry lobby group Airlines For Europe (A4E), said that repealing the tax would increase German GDP by a cumulative EUR67bn (USD79bn) over the next 12 years, and create 12,300 jobs in the two years after the tax's elimination.

"The study demonstrates the impact of passenger taxes, which hinder economic growth and tourism. Countries which have scrapped them have seen a boom in air traffic which has benefited their economies," said Thomas Reynaert, A4E's Managing Director.

The report estimates that air passenger tax will raise EUR1bn in Germany in 2017. However, by removing the tax, the Government would see revenues from indirect taxation rise as a result of additional economic growth, the report's authors argue.

"The aviation tax weakens the competitiveness of German airlines and airports and harms the entire German business location. With the upcoming government formation at federal level, there is the chance that a future coalition government finally agrees on the reduction of this special burden," said Matthias von Randow, Executive Director of BDL, Germany's aviation association.

Germany's flight tax was introduced in 2011 in an effort to cut carbon emissions. It is levied on both domestic and international airlines at rates of EUR7.50, EUR23.43, and EUR42.18 depending on the distance traveled. The tax was initially EUR8 per passenger for short-haul flights up to 2,500 kilometers, EUR25 for medium-haul flights of up to 6,000 kilometers, and EUR45 for long-distance flights, but these rates were reduced from January 1, 2012.

Earlier this year, German Economy Minister Brigitte Zypries said that the tax is damaging the country's aviation industry and should be scrapped.

Zypries's comments, made in a recent interview with Germany daily Handelsblatt, followed the demise of German regional airline Air Berlin, which announced its decision to file for insolvency in August 2017.

TAGS: tax | business | aviation | Germany | Europe | Economy

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