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German Plane Tax Cut Encourages Ryanair

by Ulrika Lomas, Tax-News.com, Brussels

18 October 2011


Budget airline Ryanair may schedule new flight routes from Germany in 2012, provided that the government abolishes its controversial plane ticket tax.

While welcoming the latest announcement from the German finance ministry of plans to reduce the plane ticket levy, head of Ryanair Michael O’Leary insisted that the proposals did not go far enough.

O’Leary stressed that the more the tax is reduced by the government, the greater the number of potential new routes would be planned for summer 2012 from the German airport of Frankfurt-Hahn. Cancellations are, however, planned for the winter.

Attributing a decline in passenger numbers to the introduction in Germany of the plane ticket tax, Ryanair recorded passenger numbers of 10 million last year compared to a projected 8 million for this year.

Before the levy was introduced, Ryanair threatened in July last year to withdraw planes from Germany.

At the time Michael O’Leary warned that the levy would without doubt lead to a withdrawal of planes from Ryanair's German bases at Hahn, Weeze and Bremen. Ryanair would also reconsider plans to fly to other German locations, he added. Planes could, for example, be stationed in countries such as Spain or Holland where there is no air ticket tax.

O'Leary argued that: “The German government’s proposed tourist tax will make Germany an uncompetitive, expensive tourism destination which will result in lost visitors, lost jobs, lost tourism revenues and end up costing Germany far more than the tax will generate. Independent analysis by RDC Aviation proves that countries which impose tourist taxes continue to see capacity, traffic and tourism declines. Growth has returned throughout Europe except in countries such as Ireland and the UK which continue to tax tourists instead of welcoming them.”

Germany’s airline ticket tax, which entered into force from January 1, 2011, is currently levied at a rate of EUR8 (USD11), EUR25, or EUR45 per passenger, depending on the destination.

According to the German finance ministry, the coalition government now plans to lower the tax next year to compensate for additional costs arising from the extension of the European Union’s (EU) emissions trading scheme to flights over Europe from January 1.

From the beginning of 2012, passengers will be faced with additional costs on international flights as the European Union’s right to impose carbon levies on all commercial flights using European airports was recently deemed by the European Court of Justice to be “compatible” with international law.

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.

As a result of the new provisions, experts have calculated that passengers on long-haul flights may be faced with additional costs of between EUR2 and EUR12 a ticket.

A draft bill drawn up by the German finance ministry provides for a 5.52% reduction in the levy across the board, which would effectively lower the rates to EUR7.56, EUR23.62, or EUR42.52 respectively.

The German government is due to re-examine its airline ticket tax and the effects of the levy next year, and is expected to present its findings to the German parliament or Bundestag at the end of June.

TAGS: tax | air passenger duty (APD) | Ireland | Netherlands | aviation | Germany | Spain

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