Air travel tax: it would collect 950 M, but would reduce the number of travelers by 8.5%

Experts do not impose the proposals, but analyze their effects. The goal of an airplane tax is for passengers to choose other transportation options before the plane.

Expectation in the aviation sector for the White Paper on taxation. The experts delivered their assessments on Thursday on the tax reform facing the Ministry of Finance in Spain. One of the key issues is the whole taxation surrounding aviation, with two proposals: the kerosene tax and the ticket tax. The first is guided by the negotiations that are taking place within the European Union, while for the second there is no harmonised measure in Europe.

The White Paper takes as an example the Netherlands, where in 2021 7.85 euros per passenger were being charged according to this tax. It also calculates the collection that Spain can obtain according to the structure of its market, taking data from the Resident Tourism Survey or IATA, among others, to adapt it to the case of our country. According to these calculations, Spain will be able to raise 951.83 million euros per year. However, the collection is only a side effect: experts calculate a fall in CO_₂ emissions of 5.59% that would come at the cost of 8.5% fewer travelers.

The White Paper does not seek to impose its vision on what the Ministry of Finance should or should not do – it simply explores the effects of different taxation proposals. In the case of the plane ticket, the objective is to tax this means of transport to invite the traveler to opt for other means, such as the train. Thus, CO₂ emissions would be reduced.

“In addition to correcting the favorable treatment of aviation fuels, this committee recommends additional tax actions to incorporate environmental costs into airline tickets with demand moderation objectives,” the experts detail. “This proposal seeks to balance the corrective actions in the different transport segments to induce behavioral changes that respond to the internalization of all air transport costs, favor modal change in short journeys and promote the development and implementation in the sector of technologies that are compatible with the ecological transition.” What the White Paper details is that the tax should not be applied on flights that do not generate direct emissions.

Under these calculations, and always taking the Netherlands as a practical example (not as a recommendation), residential travelers on domestic flights would fall the most (20.96%), while those flying abroad would fall by 6.23%. Foreign traffic would be less affected: on flights through Spain it would be reduced by 12.7%, while flights out would fall by 2.54%. However, the collection of the latter group would be the highest: 513.49 million euros per year.

Not surprisingly, there are many nuances to consider when addressing the variety of aviation taxes that exist in Europe. “It must be taken into account that a significant part of the tourists who visit Spain are already affected by national taxes on airline tickets,” the experts detail. It should be remembered that 80% of international travelers enter by air. In addition, demand reduction determines the collection potential: “If there is a lot of demand reduction (for example, because people go by train instead of plane), the tax collection falls.”

“Given the relevance of tourism activities in Spain, the committee recommends special attention to the impacts of this proposal, its interactions with the taxation of aviation kerosene, and the use of part of the collection with compensatory objectives on this sector,” they clarify.

In fact, experts are aware of the impact it has on the cost of travel for those groups in society who are less advantaged. Therefore, they encourage “compensatory mechanisms to households with lower economic capacity.” They are also aware of the impact on competitiveness. To alleviate this blow, they recommend the use of the proceeds for the development and implementation of ecological transition technologies.

This proposal is included in the report together with the analysis of a kerosene tax. The fuel tax is something that is already being discussed at European level under the Fit for 55 initiative, with which the European Commission aims to reduce net greenhouse gas emissions by at least 55% by 2030 (compared to 1990 levels). There are several measures, such as mandating a minimum percentage of sustainable fuels (known as SAF) as jet fuel. On the subject of taxation, it needs to be adopted unanimously by all Member States, so the sector expects this to be the pillar that will be adopted later.

The goal is not to raise more, but for people to take the plane less.

Kerosene is one of the few tax-free fuels in Europe. The White Paper analyses the progressive increase in the rate, from 10% to 100% of the tank. Likewise, the expected collection for Spain could go from 142 million euros per year (1.66% drop in CO_₂ emissions) to 1,203 million (16.61% less emissions). Again, “the committee recommends allocating a good part of the income obtained to promote the development and implementation in the aviation sector of technological alternatives with lower environmental impacts” and is committed to supporting people with less economic capacity.

These points do not convince the private sector. According to Javier Gándara, president of the business group ALA, “the taxes on the plane ticket that have occurred in other countries of the European Union, such as the Netherlands or Germany, have not demonstrated a decarbonization”. Gándara argues that the collection of taxes for the technological advancement of new forms of fuel “is voluntary, since taxes are never finalists.” From the group, they prefer incentives that encourage companies to invest in the transition to an economy of scale for new fuels.

Source: The Confidential