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Aviation Industry Condemns German Air Tax

by Ulrika Lomas, Tax-News.com, Brussels

11 June 2010


The European airline industry has rebuked the German government for its proposal to introduce a tax on air travel at German air terminals, to generate an additional EUR1bn annually to fund environmental initiatives.

The announcement has been attacked as an unwelcome burden on the industry when it is already struggling with low, but improving, consumer demand and the aftermath of the Icelandic volcano crisis. Michael Engel, the director of the German Airline Association said the tax would equate to around EUR10-15 on airfares.

Responding to the announcement, International Air Transport Association (IATA) Chief Executive Officer, Giovanni Bisignani, denounced the proposals as “a short-sighted policy,” and “a cash-grab by a cash-strapped government.”

“Painting [the proposal] green adds insult to injury; there will be no environmental benefit from the economic damage caused,” he added.

In its recent global outlook report, which predicted rising profits for the aviation industry in general, IATA noted that European airlines remain in the red. IATA expects the region to post losses of USD2.8bn at the end of 2010, less than the USD4.3bn loss the industry posted at end-2009.

“Even as a cash-grab, the proposed tax makes no sense. The Dutch government tried to raise EUR300m with a similar tax. It cost the Dutch economy EUR1.2bn in lost business,” Bisignani continued. He surmised that the tax would likely just encourage travelers to use airports in bordering countries with more “tax-sensible regimes,” ultimately having a more detrimental impact on the environment.

“The Dutch had the good sense to repeal their tax. Why repeat past mistakes?” questioned Bisignani.

The tax was announced as part of consolidation measures worth EUR80bn in the German coalition government's fiscal plan to tackle the country’s deficit.

TAGS: environment | tax | business | pollution tax | fiscal policy | aviation | budget | environmental tax | Germany

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