Unwarranted or excessive taxation on international air transport has a negative impact on economic and social development. IATA, in conjunction with industry partners, is running a number of campaigns to persuade governments to reduce or withdraw such taxes.
IATA actively campaigns against revenue authorities worldwide that fail to honor the International Civil Aviation Organization (ICAO) and the Organization for Economic Cooperation and Development (OECD) taxation principles.
Examples include the UK air passenger duty (APD) that is costing the UK economy some $459 million (£300 million) per year in lost GDP and around 7,000 lost jobs.
The Northern Ireland Assembly recognized the negative impact of APD when it set its rate to zero for all flights from Northern Ireland to protect the only direct flight from Belfast to the United States.
Swedish ‘Green’ passenger air tax proposal
In September 2014 IATA wrote to the leaders of the eight major political parties in Sweden to warn on the implications of a proposed passenger tax. An example letter sent to Prime Minister Fredrik Reinfeldt can be downloaded here:
'Green passenger' air tax letter (pdf)
Examples of taxation
Tourism taxes also defeat their purpose. The Australian government acknowledged this when it dropped plans to fund a tourism marketing campaign through an annual inflation-indexed increase in its passenger movement charge from 2013. Other governments have yet to see the wisdom of this move. Jamaica, for example, recently doubled its tourism tax, costing air passengers an extra $22 million annually.
ICAO policies on jet fuel, meanwhile, direct countries not to impose taxes on uplift for international flights. In Brazil, the use of parity pricing linked to the cost of importing jet fuel from the US Gulf Coast has resulted in a gross distortion of the market. Approximately 75% of the jet fuel supplied to airlines in Brazil is produced at Brazilian refineries, not imported. This represents an estimated $400 million annual cost penalty on Brazil’s competitiveness. IATA is campaigning for Brazil to change its pricing formula to reflect market realities.
Value-added tax (VAT) and other sales taxes should not be levied on international air transport either. IATA continues to challenge India’s service tax, which is levied on air tickets, fuel, and airport and air navigation services.
In Africa, there are proposals for so-called solidarity taxes. Nine countries in the region have followed the example of France and implemented duties on air travel to fund the fight against HIV/AIDS, malaria, and tuberculosis. The industry favors voluntary schemes.
Supporting Economic Analysis
Briefings and outside views on taxation