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Aviation Becoming 'Cash Cow' For Governments

by Ulrika Lomas, Tax-News.com, Brussels

27 April 2012


Policies are needed that re-invest aviation tax receipts back into the industry and to ensure that aviation is treated as an economic catalyst not a 'cash cow', says the International Air Transport Association.

Pointing to the European Union's (EU) decision to include aviation in its emissions trading scheme (ETS), IATA Director General and CEO Tony Tyler told the International Civil Aviation Organization (ICAO) Air Transport Symposium in Montreal that a globally-coordinated approach is needed to manage the aviation industry's contribution to man-made CO2 emissions rather than a regional approach which "distorts markets".

“Aviation has committed to three targets, the most ambitious of which is to cut net emissions in half by 2050 compared to 2005. We cannot do that without government cooperation. As aviation is a global industry, that cooperation must be coordinated through ICAO," Tyler said. "That is why Europe’s inclusion of international aviation in its emissions trading scheme is counter-productive. it will not have the positive impact on sustainability of globally coordinated measures through ICAO. On top of that, the unilateral and extra-territorial approach is seen by non-European states as an attack on their sovereignty."

The EU Emissions Trading Scheme was extended to aviation activities from or to European soil on January 1, 2012, to provide a solution to taxing aviation emissions, which were excluded from the Kyoto Protocol. Under the ETS, airlines operating into and out of the EU, regardless of how long that flight is in EU airspace, will be required to surrender varying emission allowances, and will be required to purchase any additional permits outside of their free allowance.

Airlines are required to immediately begin purchasing emissions allowances, but are only expected to remit the sums in 2013 meaning that Europe will have until April 30, 2013 - when airlines will be required to buy polluting rights for 2012 - to decide whether to follow through with the penalties for non-compliance provided for in the EU Directive. In the event that airlines fail to comply, the European Union has said it will impose fines of up to EUR100 for each tonne of carbon dioxide emitted without the payment of a permit, and eventually enforce an EU-wide ban on the offending airline.

Last month, the heads of some of Europe's major airlines and aviation engine manufacturers called upon EU leaders to take action and stop an escalating trade conflict with China and other countries opposing the ETS. The nine CEOs warned that countries opposed to the ETS are preparing countermeasures and restrictions on European airlines, such as special taxes and traffic rights limitations. The letters were signed by the bosses of Airbus, Air Berlin, Air France, British Airways, Iberia, Lufthansa, MTU Aero Engines, Safran and Virgin Atlantic and addressed to Prime Ministers David Cameron of the UK, Francois Fillon of France, and Mariano Rajoy of Spain, and German Chancellor Angela Merkel.

“Nobody wants a trade war," said Tyler. "And I am confident that if Europe participates whole-heartedly at ICAO — being prepared to find solutions with the international community beyond its current plans — ICAO will successfully facilitate a durable solution for environmental sustainability."

The aviation and travel industry has also slammed national air travel taxes such as the UK's Air Passenger Duty (APD), which, although levied as an 'environmental tax', are seen purely as revenue-raisers for a cash-strapped governments.

Last November, the heads of Easyjet, IAG (the British Airways parent company), Ryanair and Virgin Atlantic wrote to the UK government calling for APD to be scrapped entirely. They argued that the negative impact of APD on the UK economy outweighs any benefit from the revenue raised.

TAGS: tax | air passenger duty (APD) | aviation | trade

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