Sweden should face down industry myths about the impact of an air travel tax, and impose it
There is a great interest in Sweden on which decisions will be taken regarding aviation tax. For European airlines, resistance to air taxes is a top priority. Andrew Murphy, Manager at Aviation at Transport & Environment (T&E) believes Sweden must resist industry pressure and intimidation, and not cut the taxes. In every country, in Europe the airline industry lobbies in the same way: say the tax threaten job losses, say it’ll destroy the economy, and threaten to shut down routes if governments don’t drop attempts to tax. The UK’s air passenger duty (APD), first introduced in 1994, has withstood all onslaughts while its airline sector has thrived. Now it’s Sweden’s turn to be subject to this economic scaremongering. For airlines, low taxes mean slightly cheaper tickets, so more passengers and more money for the industry. And more CO2 of course. industry arguments have very little basis in reality, and are rarely backed up with any credible evidence. In the UK a tax of £13 per return flight for an adult really is not enough to stop anyone travelling to Europe. Nor will a tax of £7 – 37 in Sweden. The industry likes to make out that the tax is wicked and damaging, and everyone deserves a tax break at the expense of all the others who don’t fly. The industry already pays no VAT, no fuel duty and only the most minimal charges for carbon under the EU ETS.
Sweden should face down industry myths
This blog post was originally published on SvD.
There is a great interest in Sweden on which decisions will be taken regarding aviation tax. For European airlines, the resistance to air taxes is a top priority. But Sweden must resist industry pressure and intimidation, writes Andrew Murphy, Manager at Aviation at Transport & Environment (T&E).
As a pan-European NGO, we’ve seen this tactic played out across the continent; always the same themes, often the same tired analysis but fortunately with only patchy success. The UK’s air passenger duty, first introduced in 1994, has withstood all onslaughts while its airline sector has thrived. Now it’s Sweden’s turn to be subject to this economic scaremongering. We hope you’ll face it down.
We are not surprised by these tactics. After all less tax means cheaper tickets, more passengers, more flights and more money for the industry. And more CO2 of course. The problem is that the industry arguments have very little basis in reality, and are rarely backed up with any credible evidence. They also rest on the assumption that somehow the aviation sector is special and that people who fly (predominantly the relatively well off) deserve a tax break at the expense of all the others who don’t fly.
A debate on climate and tax policy will always contain a lot of competing claims relating to numbers and impact. So let’s start with a little common sense. A tax of between 80 krona (about £6.90) and 430 krona (about £37) will have only a modest impact on someone’s decision to travel. This is especially the case for business travellers, who are rarely price sensitive. This is confirmed by research from Scotland, where there is growing opposition to its government’s proposal to reduce the UK air passenger duty. One report found that an estimated one-third of flyers are business travellers and so won’t be influenced by a minimal increase in ticket prices.
Further international experience backs this up. Germany introduced a similar tax in 2011 and research conducted by its parliament found only minimal impact on passenger numbers – in fact, passenger numbers continued to grow in the years after the tax’s introduction. It shouldn’t be forgotten that both the UK and Germany are among Europe’s wealthiest and fastest growing economies. And together they cover half the EU’s aviation market. Industry may want to explain why their predictions of economic demise haven’t occurred in these countries.
The other frequently cited example is Ireland with claims that its tax, introduced in 2008, precipitated an enormous decline in passenger numbers. As someone who lived in Ireland at the time, I’m fairly confident when I say that the historic economic collapse, including a trebling in the unemployment rate, probably had more to do with a falloff in passenger numbers than the €2 and €10 tax.
As an environmental NGO, you may then ask why do we support a ticket tax that has only a minimal impact on flying? The two answers to this are urgency and equity.
The urgency of addressing climate change is clear to all rational policy makers, and Sweden’s recent climate bill is evidence of Swedish policy makers taking this seriously. But such urgency needs to be especially focused on the aviation sector, which despite being the most carbon-intensive mode of transport, continues its rapid growth. In fact its emissions have soared 40% in Sweden since 1990 – and have almost doubled as a share of Swedish emissions from 2.8% to 5.2%. Any policies which can arrest even a portion of this growth, while having minimal economic impact, should be pursued.
The equity argument is a powerful one. Aviation enjoys exemptions from both fuel duty and VAT, an exemption not enjoyed by other transport modes. VAT exemptions are meant for social necessities like baby nappies and school books. Not flights. Airlines also pay only minimal sums under the EU emissions trading system (as little as 25 euro cent for some flights), and in fact most of its emissions are exempt from this policy. Industry has resisted change to this status quo, using every means available, right up to court challenges, to protect their special treatment.
Not only is this favourable tax treatment directed at the most carbon-intensive industry, but it also happens to be an industry used disproportionately by the well-off. One study in the UK found that 70% of flights are taken by the same 15% of the population. In fact only an estimated 5% of the world’s population have ever flown. These tax exemptions are counterproductive – they incentivise flying which is the quickest and cheapest way anyone can warm the planet. They also disproportionately pamper the well off at the expense of all others. Any organisations or individuals concerned with the equity of climate change should champion Sweden’s decision to introduce a ticket tax.
There is a huge focus on what Sweden decides to do. One major European airline association has listed opposing ticket taxes as one of its highest priorities. But Sweden should face down this industry pressure and scaremongering. Adding ticket taxes to its list of impressive policies, such as its recent climate bill, will ensure Sweden remains a world leader in taking practical action to address climate change.
Swedish government commission proposes climate tax (about £6.50 – £29) on air fares
A commission appointed by the Swedish has recommended that airlines operating in Sweden should pay a tax of between 80 and 430 Swedish crowns ($9-47 or £6.80 to £29) per passenger per flight to compensate for carbon emissions. One the levy is instituted, the cost of a domestic flight would rise by 80 crowns and an international flight by 280 to 430 crowns (£24 – 29), depending on the distance of the flight. Currently in Sweden airlines pay VAT of 6% on domestic flights while international flights are exempt from VAT. Predictably, the centre-left government’s plans for an airline tax have been criticised by opposition parties who say it would do little to reduce CO2 and would harm the airline industry, by very slightly reducing demand. The government is expected to incorporate a form of the proposal, possibly amended, within their next autumn budget in October 2017. The Swedish commission proposed that the tax come into force on January 1, 2018 and it would be expected to raise around 1.75 billion Swedish crowns (about £150 million) per year. Many other countries have charges for flights, at different levels, and for different reasons. These include Australia, Norway, Germany, Austria, France, Spain, Doha, Abu Dhabi, Sharjah and Hong Kong. Details at link below.