The leak of a study funded by the European Commission has thrown the issue of aviation taxation into the spotlight, with sustainable transport lobby group Transport & Environment (T&E), saying the report shows taxing aviation fuel would significantly cut emissions without affecting GDP and employment.
T&E, which released details of the report May 13, said the study on aviation taxation, undertaken as part of the 2015 Aviation Strategy, was completed in mid-2018 but has not been published. It shows that “Europe is chronically undertaxing the sector in comparison to other major markets,” including the US, China, Brazil and Australia.
“Most member states have zero taxation of international aviation while 12 do not even tax domestic aviation despite the total absence of any legal barriers to do so,” T&E said. “This stands in contrast to other parts of the world, where ticket taxes are widespread and taxing kerosene for domestic aviation is common.”
The report shows taxing aviation kerosene sold in Europe would cut aviation emissions by 11%—or 6.4 million tonnes of CO2—and have no net impact on jobs or the economy as a whole, while raising almost €27 billion ($30 billion) in revenues every year, T&E said.
According to T&E, the report shows that imposing a fuel tax on all departing flights to all destinations at the €0.33 EU energy tax minimum would cause ticket prices to rise 10%; flights, passengers and CO2 emissions to fall 11%, people affected by noise to drop 8% and fiscal revenues to rise from €10 billion to €27 billion. Jobs and aviation value added would fall 11%, but the overall impact on EU jobs and GDP would be zero.
A commission spokesperson said: “We have no comment to make on leaks. We can confirm that we have commissioned the reported study and it is currently being finalized for publication.”
The spokesperson added that the Commission is in the process of re-evaluating the Energy Taxation Directive, which governs how fuels and energy products including aviation fuel are taxed, to see if a potential update is necessary.
The directive allows European member states to exempt aviation fuel for domestic, intra- and extra-EU flights from taxation, but the spokesperson added that EU member states are free to tax aviation fuel used for domestic flights, or intra-EU flights provided there is an agreement between the departing and the arriving countries.
“Currently, there is global consensus to exempt aviation kerosene from tax. The impact of any tax-related matter affecting international air transport should of course be considered carefully in the context of international competition and connectivity,” the spokesperson added.