Experts say legal obstacles no barrier to introducing aviation fuel tax for flights in Europe



Legal obstacles no barrier to introducing aviation fuel tax in Europe, say experts

February 3, 2019 (Transport & Environment)

EU countries can end the decades-long exemption and tax kerosene on flights between them, according to legal experts. This could either be done at EU level through a series of bilateral agreements or by agreement between individual countries, the independent legal analysis for green NGO federation Transport & Environment (T&E) finds. The old argument that foreign carriers’ operating within the EU – de facto a small number of flights – can’t be taxed can be overcome by introducing a de minimis threshold below which fuel burn would not be taxed.

Right now airlines, unlike almost all other forms of transport, pay no fuel tax on flights within or from the EU – even though aviation causes 5% of global warming.[1] Despite the aviation industry’s attempts to hide behind the 1944 Chicago Convention, that agreement is not the problem preventing fuel taxation. In fact it is old bilateral ‘air service agreements’ that European governments signed up to years ago that include mutual fuel tax exemptions for non-EU airlines.

EU countries should set a de minimis threshold for all carriers where establishing a kerosene tax would be in conflict with the exemptions, the report finds, and efforts should be accelerated to remove the remaining exemptions. So far almost 30 agreements have been successfully renegotiated.

Bill Hemmings, aviation director at Transport & Environment, said: “The aviation industry has been treated with kid gloves for decades when it comes to fuel taxation. The US, Japan, Brazil, India, Norway and Switzerland all tax domestic aviation fuel. Why should the EU’s own jurisdiction be treated any differently?”

Recent events in France, Sweden and Belgium have reignited the debate about aviation’s special tax treatment. In France ending the aviation fuel tax exemption is now one of the demands of the Gilets Jaunes movement.[2]

Aviation emissions have doubled since 1990. A kerosene tax would incentivise airlines and manufacturers to reduce the sector’s environmental impact, shifting environmental costs to users while still raising money to allow tax cuts for citizens or improve public services. Member states have been free to tax fuel on domestic flights since 2003 but so far only the Netherlands has acted on this.

Bill Hemmings concluded: “There is fresh talk of how taxation can help curb climate change, but continuing to give the most carbon intensive of transport modes a free ride is unfair to other taxpayers and to the very many who don’t fly. But most of all, it’s plane stupid.”

Note to editors:

[1] Lee, D. et al., 2009. Transport impacts on atmosphere and climate: Aviation. Atmospheric Environment.

[2] L’Obs, 30 November 2018. “Gilets jaunes” : on a décortiqué chacune des 42 revendications du mouvement.


The report, “Taxing aviation fuels in the EU” by CE Delft, is at 

[De minimis means it can be ignored, if the amounts are too small to bother with. ].


Executive Summary

Directive 2003/96/EC mandatorily exempts aircraft fuel consumed on commercial flights between EU States from taxation. Taxes are levied on energy products as defined in this Directive. At the same time it allows EU/EEA Member States to waive this exemption pertaining to taxation of aircraft fuel through bilateral agreements, and for other purposes as detailed below.

So far, no examples of such bilateral agreements are known. The present brief report endeavours to contextualise this option in light of European and international law. From an international air law point of view, aircraft fuel used on transit flights is not taxable. The same is generally true for aircraft fuel introduced in foreign territory and used on international flights.

However, multilateral air services agreements such as the EU-US agreement on air transport and certain bilateral air services agreements all of which have been concluded in the 21st century open the door for a waiver of this exemption on intra-EU/EEA flights when two, or more, European States engage into an agreement on taxation of aircraft fuel, or when they refer to a waiver pursuant to domestic law. Thus, they provide a legal basis for the introduction of taxation of aircraft fuel.

A revision of Directive 2003/96/EC ought to address these recent developments, and explain the term “international conventions” justifying, in the views of the EU policymakers, a continuation of the aircraft fuel tax exemption.

In order to facilitate the introduction of taxation of aircraft fuel and circumvent obstacles pertaining to mandatory exemptions regarding taxation of aircraft fuel raised by air services agreements, thought could be given to include a de minimis measure in a revised version of Directive 2003/96/EC. Such a measure should preferably be taken at the EU rather than at any other level, whether bilateral or national, in order to harmonise conditions for the introduction of a partial or total waiver of the exemption. However, the establishment of such a measure requires a very careful assessment of its legal and economic implications.

A de minimis measure has been used in, for instance, the EU ETS Directive (2008/101). When the EU considers the introduction of an aircraft fuel tax, preferably in conjunction with a de minimis measure, regard must be had to general principals of EU law. They include the non-discrimination principle, the fiscal neutrality of the proposed tax measure, a prohibition of infringement of free movement of air services and compliance with European competition and State aid rules.