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National levy on aviation disrupts EU level playing field

More Member States are expecting the EU to come up with some sort of levy on aviation in the context of sustainability. This is, however, a very tricky subject because of the national and often chauvinistic character of the European aviation industry. But to maintain a level playing field for the EU aviation, a levy or tax on aviation should only be based on European legislation applicable in all Member States.

As the EU legislation process is a long route, some Member States are already moving ahead having lost faith in a European solution. Some of them are looking at placing a national levy on aviation which contradicts the non-discriminatory and open aviation market within the EU and disrupts the level playing field.

There are several options that the EU or Member States could impose.

First, there is a possibility of a levy on noise and emissions based on the type of plane used. This would stimulate the use of more efficient and less noisy airplanes. However, it will also favour intra-Europe flights and smaller airplanes, whilst heavier and intercontinental airplanes will pay the price. Moreover, with air freight being inherent intercontinental and heavy, they would sincerely be paying the price for a levy on noise and emissions of the airplane. Also, there is a broad consensus that intra-Europe flights should compete more with rail. Having a levy that does not tackle short distance flights and slows down the extensive growth of low cost/leisure airlines would be counterproductive on these two goals.

Second, there are talks of reintroducing taxes on flight tickets for domestic passengers. Freight and transfer passengers would be exempted from this tax. This is the easiest way for Member States to impose a levy. However, opposition from major airlines on this issue is strong and the sentiment behind this tax is very negative. From an air freight perspective, a tax on domestic passengers could be a positive thing. However, this also hurts the operation of airports who are dependent on passenger flows for investments in airport infrastructure such as terminals and warehouses.

Third, Members States are looking at possibilities for putting a levy on kerosene, which is exempted from excise duties. This could spur innovations in bio- or synthetic kerosene, or at least make these fuels more cost competitive. Some airlines are pushing governments to impose a duty on kerosene and use that as a revolving fund to spur these innovations. It could also put pressure on the EU for more efficient air traffic management (ATM) routes and make the final push to fully implement the Single European Sky (SES) programme. A tax on kerosene would increase the push for efficient flying routes. The downside is that there shouldn’t be any discussions on how much kerosene an airplane should take based on the costs in relation to security. Furthermore, oil companies are fighting heavily against a kerosene (excise) duty.

As for shippers, of course, the second option charging domestic passengers and exempting air freight will hurt the least. But, shippers do have a responsibility towards the environment and future generations. A levy on the type of airplane in relation to noise and emissions is an easy and counterproductive way. Perhaps, the third solution is the most sensible one, but it is the least discussed option on the table. Imposing levies by individual Members States and creating a disturbed playing field would only use aviation as a cash cow for governments, rather than making a push for sustainability.

The EU Aviation strategy states: “For the EU aviation industry to remain competitive, it is essential that market access is based on a regulatory framework which promotes EU values and standards, enables reciprocal opportunities and prevents distortion of competition.”

This article was posted on May 14th, 2018 by Katsiaryna Kliuyeva under News