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German FM Stands Firm On Plane Ticket Tax

by Ulrika Lomas,, Brussels

29 May 2012

The black-yellow coalition government’s plane ticket tax has not served to adversely affect airline companies, according to an internal position paper drawn up by the German finance ministry.

Introduced in Germany at the beginning of 2011, the tax has had a slightly dampening effect on the number of passengers departing from Germany, the ministry considers in the paper, insisting that other factors, notably the dramatic rise in the price of kerosene, have had a much greater impact on airline companies.

Furthermore, the ministry maintains in its paper that there is no evidence to suggest that passengers have elected en masse to fly from border airports to avoid the charge.

Despite the fact that the actual number of air passengers in Germany rose 5% last year compared to 2010, to 198.2 million, German airlines have continued to fiercely oppose the tax and to urge the government to abolish the controversial levy, which last year generated revenues of around EUR959m (USD1.2bn).

The latest revelations will be a great blow to German airline companies as the reports follow hot on the heels of an announcement made just days earlier by German Transport Minister Peter Ramsauer, indicating that he has not ruled out the idea of modifying the controversial ticket tax imposed on flights departing from German airports.

Following the recent meeting with top industry representatives in Berlin, the German minister provided his assurances that the effects of the tax on the sector would be carefully evaluated during the government review scheduled to take place by the end of June.

Ramsauer said that competitive disadvantages for German airlines were no longer acceptable.

German airlines and airports have been calling for the government to abolish the tax and have been seeking better framework conditions for the sector since the levy was introduced at the beginning of 2011.

Underscoring the fact that the industry is currently in global competition, and that there should not therefore be any competitive disadvantages arising from either national or European regulations, Deutsche Lufthansa’s Chief Executive Officer Christoph Franz warned after the May meeting that an industry in which key players are no longer able to achieve positive results “is sick”.

Underlining his confidence that political decisions would be taken to end the levy, Franz reiterated at the time the importance of airlines being able to continue to invest.

At the beginning of the month, presenting details of the company’s 2011 annual report at its annual general meeting in Cologne, Franz urged the coalition government to end the controversial plane ticket tax currently costing the company around EUR361m annually.

Germany’s airline ticket tax, which entered into force from January 1, 2011, was initially levied at a rate of EUR8, EUR25, or EUR45 per passenger, depending on the destination.

The German finance ministry announced plans at the end of last year to lower the tax from January 1, 2012, to compensate for additional costs arising from the extension of the European Union’s (EU) emissions trading scheme to flights over Europe from the beginning of 2012. The ministry also confirmed plans to implement a percentage reduction of the tax rates annually.

In accordance with the European emissions trading scheme directive, airlines operating into and out of the EU will from 2012 be required to surrender varying emission allowances, depending on the flight, and will be required to purchase any additional permits outside of their free allowance.

Tickets are now levied in Germany at a rate of EUR7.50, EUR23.43, and EUR42.18.

TAGS: environment | tax | air passenger duty (APD) | aviation | Germany | Europe

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