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Irish Air Tax Stays As Deal Fails

by Jason Gorringe, Tax-News.com, London

04 August 2011


Having failed to secure a satisfactory deal with airlines the Irish government has announced that it will retain the controversial travel tax.

As part of the Jobs Initiative package unveiled in May, the government had pledged to suspend the EUR3 tax, subject to the conclusion of a deal with airlines to re-instate cancelled routes and restore lost capacity. However, the Minister for Transport, Tourism and Sport, Leo Varadkar, has now announced that the levy is here to stay, pending a further review next spring. According to Varadkar's department, it was not possible to secure solid commitments from the airlines on inbound routes or capacity.

Varadkar stressed that the government's aim was to bolster the number of tourists travelling to Ireland, rather than to increase the number of Irish people using the country's airports to travel overseas. Nonetheless, in spite of the breakdown of talks, Varadkar said that he remains open to discussions and, should progress be made in this area, the option remains to suspend the tax next year.

Until then, the government intends to use a significant proportion of the revenues raised through the tax to support inbound tourism. A EUR8.5m (USD12m) fund is to be used for co-operative marketing with airlines, airports, ferry companies and tour operators on inbound routes into Ireland with particular focus on the UK regions, the US, Germany, France and the Benelux countries.

Varadkar added: “I am disappointed that it was not possible to come to an agreement with the airlines. I could not agree to foregoing significant revenues in taxes without a solid commitment from the airlines on the restoration of key in-bound routes and capacity. While the airlines did welcome the initiative some of the airlines were not in a position to make commitments on increased capacity due to the uncertain economic situation. This is entirely understandable. In addition, the new routes offered were predominantly to Mediterranean hotspots which would actually have taken many more people out of the country than they would have brought in. However, I remain open to discussions with the airlines and the government will review the travel tax again in spring 2012.

"In the meantime, Tourism Ireland will lead the marketing campaign to promote inbound travel into Ireland in co-operation with airlines, ferry companies, tour operators and airports. This could take the form of advertising or promotions. Airlines, ferry companies, tour operators and airports participating in the programme will be expected to make a contribution to the cost thus leveraging a final investment in excess of the government contribution,” Varadkar concluded.

TAGS: tax | Ireland | aviation | travel and tourism | tax rates

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