Part of Our EU-27 Green Tax Wiki

Introduction

In 2019, the aviation industry produced 915 million tons of CO₂ or 2% of global CO₂ emissions (ATAG). The environmental effects of flights can be reduced or offset through various forms of aviation taxation. In the European Union, aviation taxes come in the form of ticket taxes and value-added taxes. While fuel taxes are another option, and may seem like the most obvious option, fuel taxes are currently not applied in the European Union.

Ticket Taxes*

A ticket tax is levied on each flight passenger by the country that the passenger is departing from and is collected at the time the ticket is purchased. The list of EU countries that implement ticket taxes is constantly changing. It currently includes Austria, France, Germany, Italy, Luxembourg, and Sweden with prices ranging between 1 and 42 euros per flight. Throughout these countries, taxation methods vary between a flat tax and tiered tax based on distance. These taxes are not always reinvested to benefit the environment, but the use of the tax alone can reduce the number of people that choose to use airplanes as a mode of transportation which does have a positive environmental impact.

Ticket taxes are not always successful. They can drive consumer-demand down so much that revenue for an airline or country is lost overall. The amount of money that is brought in from ticket taxes sometimes cannot offset the larger economic effects of the tax. This was the case for the Netherlands and Ireland which led to the abolishment of ticket taxes in these two countries.

*It should be noted that ticket taxes have different names across countries. Another more common name for it is a departure tax.

Value-added Taxes

A value-added tax is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale (Investopedia). Most EU members levy VAT on domestic flights, but international flights are VAT-exempt by EU law (ATAG).

Rates vary across members, and flights may be taxed at a standard or reduced VAT rate.

Fuel Taxes

By law, EU countries are not permitted to levy excise duties on fuel used for commercial international flights (Asen). They can, however, levy excise duties on fuel used for domestic flights, and members may enter into agreements where flights between two consenting members have a fuel tax. Fuel taxes have generally been strongly opposed throughout the EU, but in the past year, fuel taxes have been gaining support.

Country-specific Aviation Taxes

France - An Ecotax was recently introduced and applies to all flights departing France after January 1, 2020. This tax is similar to a ticket tax but costs are based on more factors including flight duration, destination and seating class. Though the tax’s name refers to the environment, it is unclear if the revenue will go towards government green initiatives. As of now, the revenue will go towards daily transportation.

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) There are many ways in which current policy could improve. Since 2019 airlines have had to monitor and report their emissions as required by CORSIA. Emissions over a certain level have to be offset in another way, but this is also a great opportunity for a tax to be implemented on excessive emissions. There is an important distinction between offsetting and reducing emissions that CORSIA policy doesn’t currently address.

Next Steps

Throughout 2019, several EU countries pushed for a EU-wide aviation tax to be introduced. Countries including France and the Netherlands acknowledged many issues with the current taxation, or lack thereof, within the aviation industry. Countries wanted increased or universal ticket taxes and the removal of tax exemption for aviation fuel. After the new President of the European Commision, Ursula von der Leyen, was elected, she revealed the details of her Green Deal. She mentioned the importance in sustainable transport and promised to review the Energy Taxation Directive which is the cause of many fuel subsidies. Though if the action taken is not sufficient, plenty of EU leaders have made it clear that they will take matters into their own hands and begin internalizing aviation externalities in their own ways.

Conclusion

Throughout the European Union, many groups and leaders are working to improve aviation taxes to benefit the environment and the EU’s goal of carbon neutrality by 2050. Changes in taxation policy are difficult within the EU but many analyses of the effects of increased aviation taxes have taken place insearch of a better alternative. Much of the opposition to increased aviation taxes in the EU relate to the short-term economic effects on the airline industry and the economies of EU members. However, the opposition fails to acknowledge the more drastic long-term economic effect that will result if carbon emissions are not reduced more aggressively now. While the 2% of global CO₂ emissions that aviation contributes cannot not be fully eliminated, taking measures to reduce it and set an example for other commercial industries is important as well.

Sources

Asen, Elke. “Flights in Europe: Aviation Taxes.” Tax Foundation, 28 Oct. 2019, http://taxfoundation.org/aviation-taxes-europe-2019.

“Carbon Offsetting Scheme for International Aviation (CORSIA).” IATA, www.iata.org/en/policy/environment/corsia.

Clercq, Geert De. “EU Nations Aim High with Plan to Tax Air Travel.” Reuters , Thomson Reuters, 20 June 2019, http://www.reuters.com/article/us-climate-change-eu-airlines/eu-nations-aim-high-with-plan-to-tax-air-travel-idUSKCN1TL1I7.

Faber, Jasper, and Thomas Huigen. “A Study on Aviation Ticket Taxes.” CE Delft, www.cedelft.eu/en/publications/2208/a-study-on-aviation-ticket-taxes.

Faber, Jasper, and Aoife O’Leary. Taxing Aviation Fuels in the EU, http://www.transportenvironment.org/sites/te/files/publications/2019_02_CE_Delft_Taxing_Aviation_Fuels_EU.pdf.

Facts & Figures, www.atag.org/facts-figures.html.

Grey, Eva. “Mapping out Airport Taxes around the World.” Airport Technology, 23 Jan. 2020, http://www.airport-technology.com/features/featuremapping-out-airport-taxes-around-the-world-5647771.

Kagan, Julia. “What Is a Value-Added Tax (VAT)?” Investopedia, Investopedia, 28 Feb. 2020, www.investopedia.com/terms/v/valueaddedtax.asp. “Legislative Train Schedule.” European Parliament, www.europarl.europa.eu/legislative-train/theme-a-european-green-deal/file-refueleu-aviation.