Report shows EU governments miss out on up to €39bn a year due to aviation’s tax breaks (no VAT or fuel duty)
A report has been produced, by consultants CE Delft, for the sustainable transport group, Transport & Environment (T&E). It shows that debt-ridden EU countries miss out on up to €39bn every year from airlines not paying taxes. CE Delft found that this revenue shortfall is due to out-dated EU laws exempting international flights from fuel taxes, and from VAT, which is levied on almost all consumer goods. While every European consumer, small business and haulier has to pay on average a tax of €0.48 / litre of fuel for petrol or diesel, big commercial airlines – both those based in the EU and overseas – don’t pay any tax on their fuel. This revenue shortfall totals up to €32bn a year. In addition to this EU governments miss out on €7.1bn every year on VAT which is exempt on international flight tickets. T&E’s aviation policy officer Aoife O’Leary said: “International airlines are like flying tax havens inexplicably exempted from paying the basic EU taxes every EU citizen and company is obliged to pay.” However the airline industry says that without such tax holidays it would be hard pressed to turn a profit. (So much fuel used. So much CO2 generated. So little profit.) The EU consultation on state aid to airports & airlines closes 25th September.
This is the Transport & Environment press release about a study done by CE Delft on the size of the hole in government budgets – just from aviation not paying its fair share.
EU governments miss out on up to €39bn a year due to aviation’s tax breaks
Brussels, 24 July 2013 (Transport & Environment)
Debt-ridden EU countries miss out on up to €39bn every year, a sum rivalling that of Spain’s drastic budget cut in 2013, representing fuel and value-added taxes (VAT) that air carriers don’t pay, a new study shows.
The report, conducted by environmental consultancy CE Delft for sustainable transport group Transport & Environment (T&E), found that this important revenue shortfall is due to out-dated EU laws  exempting international flights from fuel taxes that do, however, apply to other modes of transport such as road transportation and from VAT, which is levied on almost all consumer goods.
While every European consumer, small business and haulier has to pay on average a tax of 48 eurocents per litre of fuel whenever they fill up their vehicles, big commercial airlines – both those based in the EU and overseas – don’t pay a single penny of tax on their fuel.
This revenue shortfall totals up to €32bn a year.
In addition to this , EU governments are missing €7.1bn every year on VAT which is exempt on international flight tickets.
T&E’s aviation policy officer Aoife O’Leary said: “International airlines are like flying tax havens inexplicably exempted from paying the basic EU taxes every EU citizen and company is obliged to pay. We all have no option but to pay VAT on the goods we buy, and the fuel tax when we fill up our cars. But somehow it is OK and lawful for airlines to be let off the tax hook just like Starbucks and Amazon, especially when studies show that the vast majority of customers of the airlines come from the financially well-off. Cash-strapped EU governments should seize the opportunity, collect this low-hanging fruit and generate revenues badly needed to cover their budget deficits.”
Air travel is the most climate-intensive means of transportation, responsible for 5% of global warming. Its greenhouse gas emissions are set to grow at 4-5% a year globally with no sign of that figure being reduced. Despite aviation’s environmental harm, EU governments find it acceptable to subsidise this growth while, on the other hand, they try to legislate to combat its perverse climate effects. On top of the taxbreaks mentioned, EU countries also hand out over €3bn a year to the industry to artificially expand demand through building new runways or cutting airport costs .
“These tax breaks and subsidies amount to a government license to heat the planet. These are the same airlines that oppose the EU’s climate change legislation for aviation.
“The subsidies also unfairly give airlines a competitive advantage vis-à-vis other modes of transport and exacerbate financial deficits having deep social effects. We urge EU Member States to stop subsiding the polluting expansion of aviation,” Aoife O’Leary concluded.
Download 2 page T&E briefing “Briefing: Does Aviation Pay its Way?”
Download 8 page report by CE Delft
Notes to Editors:
 The Energy Tax Directive (2003/96/EC) does not allow the taxation of fuel for international aviation, but allows EU Member States to tax fuel used in domestic aviation or via a bilateral agreement with another Member State, tax the fuel used in flights between those countries. Very few countries have domestic VAT and there are no intra-EU bilateral agreements on taxing aviation fuel. The VAT Directive (2006/112/EC) exempts international air travel from VAT, but allows EU Member States to impose VAT on domestic air travel. There are very few countries which do this and the total receipts from these domestic flights across the EU amounts to only €1.1bn per year –this figure has been deducted from the total estimated VAT in the CE Delft study. For more information on the EU legislation see: http://ec.europa.eu/competition/consultations/2011_aviation_guidelines/t_and_e_annex_en.pdf
 There are ticket taxes in the UK (the Air Passenger Duty), in France (the Solidarity tax), in Germany (the Lufverkehrsteuer), in Austria (the Flugabgabe) and in Ireland (the Air Travel Tax). The CE Study takes these into account and deducts them from the total estimated VAT as some of these taxes are imposed partially as a response to the lack of VAT paid by the industry.
As easyjet release their profits: http://www.ft.com/intl/cms/s/0/59fd9404-f42d-11e2-a62e-00144feabdc0.html#axzz2Zx18x4DS
T&E say they should have had to pay fuel tax and VAT!
Study: Aviation tax breaks cost EU states €39 billion a year
The report, which was commissioned by the green campaigning group, Transport and Environment (T&E), blamed outdated EU laws, which privileged aviation over less polluting forms of transport.
“International airlines are like flying tax havens inexplicably exempted from paying the basic EU taxes every EU citizen and company is obliged to,” said T&E’s aviation policy officer Aoife O’Leary.
“Cash-strapped EU governments should seize the opportunity, collect this low-hanging fruit and generate revenues badly needed to cover their budget deficits,” she added.
According to the study, €32 billion a year is lost due to the airlines’ exemption from paying fuel taxes, while another €7.1bn goes missing because of VAT exemptions on international flight tickets.
Moving up the political agenda
The issue of tax breaks for airlines is moving up the political agenda, partly because petrol pump price increases are hitting consumers hard.
But the aviation industry is also facing intense pressure ahead of the International Civil Aviation Organisation (ICAO)’s triannual meeting in Montréal in September.
There, an attempt will be made to agree a market-based measure that could resolve the increasingly bitter dispute over the EU’s efforts to make airlines pay a price for their carbon emissions under the Emissions Trading System.
Writing in the China Daily last month, Achim Steiner, director of the United Nations Environment Programme, said airline tax breaks “give air transport an unfair advantage over rail and road, and offers less incentive to aircraft designers and operators to accelerate a transition to ever-more fuel-efficient planes.”
However the airline industry says that without such tax holidays it would be hard pressed to turn a profit.
A recent report by the International Air Transport Association contended that, despite a ten-fold growth in air travel since 1973, the industry’s current profit returns will not meet the $4-$5 trillion needed for its planned expansion, primarily in the Asia-Pacific region. And regional airlines contend they contribute significantly to reviving tourism in some areas of Europe, contributing to economic growth.
Although airlines are today only responsible for around 2% of the world’s CO2 emissions, when NOx emissions, water vapour, soot and sulphates, contrails and enhanced cirrus cloud formations are considered, they account for some 5% of planetary global warming and the figures are rising fast.
The EU cites estimates that by 2020, global international aviation emissions will be around 70% higher than in 2005 even if fuel efficiency improves by 2% per year. The ICAO forecasts that by 2050 they could grow by a further 300-700%.
The EU recently published proposals to cut direct state aid to the aviation industry, but T&E says they will allow European airlines to continue receiving €3 billion a year in subsidies to artificially expand demand by building new runways and cut airport costs.
The consultation on the EU’s plans closes on 25 September.
European Commission website.
State aid to airports and airlines
Consultation on the draft Guidelines on State aid to airports and airlines
Competition: State aid
Institutions, public authorities, citizens, companies and organisations are welcome to contribute to this consultation. Contributions are particularly sought from public authorities (Member States, Regions, Cities and Municipalities) financing airports and providing start-up aid for the development of new routes and the aviation industry (in particular airport operators, airlines, ground handling companies).
Period of consultation
From 03.07.2013 to 25.09.2013
Objective of the consultation
The purpose of the present consultation is to invite Member States, other institutions and stakeholders to provide feedback on the revised draft guidelines on State aid to airports and airlines. These revised draft guidelines take stock of the new legal and economic situation concerning the public financing of airports and airlines and specify under which conditions such public financing constitute or not State aid under the meaning of Article 107 (1) of the Treaty, and when it constitutes State aid, under which conditions it can be declared compatible with the internal market. The Commission’s assessment is based on its experience and decision practice, as well as on its analysis of current market conditions in the airport and aviation sectors.
The Commission proposes a balanced approach, which is neutral vis-à-vis the various business models of airports and airlines, and takes into account the growth prospects of air traffic, the need for regional development and accessibility and the positive role of the Low Cost Carrier model for the development of some regional airports. Against this backdrop the present draft guidelines introduce a new approach to the assessment of compatibility of aid to airports and airlines:
- Whereas the 2005 Aviation guidelines left open the issue of investment aid, these revised Guidelines define maximum permissible aid intensities depending on the size of the airport.
- For a transitional period of up to 10 years, operating aid to regional airports can be declared compatible.
- The compatibility conditions for start-up aid to airlines during the transitional period have been streamlined and adapted to recent market developments.
How to submit your contribution
- You are invited to submit your comments to the revised draft guidelines hereunder in any official EU language. Given the possible delays in translating comments submitted in certain languages, translations of the replies into one of the Commission’s working languages (preferably English) would be welcome to enable the Commission to process them more swiftly.
- In your reply, please indicate whether you are replying as citizen, organisation or public authority. If your organisation is registered in the Transparency Register, please indicate your Register ID number. If your organisation is not registered, you can register now. Responses from organisations not registered will be published separately.
- Contributions will be published on this webpage. Submissions that are clearly marked “confidential” will be treated as such and not published. In that case please also provide a non-confidential version of your reply. It is important to read the privacy statement attached to this consultation for information on how your personal data and contribution will be dealt with.
View the consultation document at
http://ec.europa.eu/competition/consultations/2013_aviation_guidelines/aviation_guidelines_en.docx (also available in other languages)