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Ramsauer 'Open' To Correcting German Plane Ticket Tax

by Ulrika Lomas, Tax-News.com, Brussels

28 May 2012


German Transport Minister Peter Ramsauer has not ruled out the idea of modifying the country’s highly controversial plane ticket tax imposed on flights departing from German airports.

Following a recent meeting with industry representatives in Berlin, the German minister provided his assurances that the effects of the tax on the sector would carefully be 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 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 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 (USD465m) annually.

Despite confirming that the company delivered a “solid result” for 2011, in what was again “a difficult operating environment”, Franz underscored that the political environment in Germany and in Europe is nevertheless making it difficult to improve Lufthansa’s earnings position.

The introduction of the ticket tax and the European emissions trading scheme, the night-flight ban in Frankfurt and the absence of a single European airspace have added expenses of some EUR700m for Lufthansa in the current year alone, money that is urgently needed for investment in a modern and environmentally-friendly fleet, according to Franz.

Franz announced: “We have brought our result back home safely. The steep rise in fuel costs, the European debt crisis, political unrest, special levies and taxes as well as the night-flight ban in Frankfurt did not make it an easy journey.”

Franz warned: “The airlines’ role as an engine of the economy, as a driver of growth, jobs and prosperity is increasingly under threat. As an export nation, Germany needs mobility more than ever. We are not asking for subsidies. But air traffic needs much more local support than it gets at present. We will only make headway if there is cooperation between airlines, politics and society.”

Consequently, and to rapturous applause, Lufthansa’s CEO called for the government to reverse its decision to proceed unilaterally with the national tax.

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, and expected to yield around EUR1bn for the state.

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 taxed in Germany at rates of EUR7.50, EUR23.43, and EUR42.18.

Following its re-examination of the airline ticket tax and the effects of the levy, the government is expected to present its findings to the German parliament, or Bundestag, at the end of June.

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

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