MINISTERS SHOULD HEED IMPACT OF AIR TAX

05/07/2005

Finance ministers should heed a European Commission (EC) impact assessment on the proposed Overseas Development Aid (ODA) tax on air passengers, says the European Regions Airline Association (ERA).

Director General Mike Ambrose said: “At last, the Commission has produced an impact assessment on aviation taxation. Predictably, it shows the impact to be almost entirely negative. Now let us see whether the politicians are prepared to act responsibly based on this information.”

ERA says an EC report to European Union finance ministers is clear – a new tax on air passengers will worsen Europe’s competitiveness.

There are three main effects, according to the EC:

• The Commission recognises that a tax will reduce demand. Even if many air markets continue to grow, but at a slower rate, the Commission says “even a small reduction in demand could have a significant impact on the profitability of [Europe’s] air carriers”.

• The Commission states: “[the EU’s] peripheral countries and regions that are more dependent on aviation for transport could be more affected”. The Commission calls for further study before decisions are taken. ERA believes that there would be a detrimental impact on employment in Europe’s regions.

• Some leisure travel originating in the EU may switch from EU to non-EU destinations. ERA believes that this would affect employment in the EU’s tourist destinations.

Said Mike Ambrose: “There are other ways in which aviation can be used for overseas development and these should be explored instead of a tax on passengers that will damage Europe’s own interests”.

In a paper to EC Transport Commissioner Jacques Barrot last week, ERA put forward proposals in which air transport could be stimulated to assist development in poorer countries. These included:

• the transfer on favourable terms of aircraft that are perfectly safe but are no longer permitted to operate to European cities on noise grounds;
• the provision of training at favourable rates for aviation staff based in developing nations, particularly for all safety-related activities;

• EU investment in the provision of air navigation services in developing nations, producing a double benefit – increased safety of air transport in those nations, and increased safety for European airlines’ overflights and operations to those nations.

The Commissioner is currently considering the ERA proposals.