Sánchez’s plane ticket tax would destroy up to 34,000 jobs

Before the coronavirus storm ruined the political agenda of the Spanish Government, pedro Sánchez’s economic leaders set in motion the machinery to create a tax on airline tickets. Although the objective of the new tax, according to the public consultation of the Ministry of Finance, is fundamentally “to adapt to the average of the rest of the Member States in terms of environmental taxation” and limit CO emissions₂, in the background there is also the need for the Executive to obtain more resources with which to finance its spending programs when it is possible to implement them.

But more than contributing to public finances, a potential aviation tax would hit those in the sector, which will be greatly affected by the coronavirus crisis; and, in a second round effect, those of the State. That is what a study by professors Arturo Benito and Gustavo Alonso, from the Higher Technical School of Aeronautical and Space Engineering (ETSIAE), belonging to the Polytechnic University of Madrid (UPM), highlights, which yields a strong conclusion: a tax on airline tickets can have a cost of up to 1,000 million euros for Spain and 34,000 jobs for the airline sector.

844,000 fewer tourists

Although there is the possibility of taxing both banknotes and fuels, the Treasury consultation implies that it will be applied to the tickets, following the French model. According to the ETSIAE document, for every 1% tax applied on the ticket, there would be losses in the international tourism sector of 92 million euros, and a decrease of 84,000 international tourists, with a destruction of 3,370 jobs. However, the _CO2 emission savings sought by the measure would be almost imperceptible. It would barely reach 0.06%, half of what the number of international tourists would fall. And the higher the percentage applied to the tickets, the greater the losses. If the tax were 10% on the ticket, the economic losses would rise to about 1,000 million euros (916 million) as a result of a fall of almost one million international tourists (844,000). This would have a negative impact on tourism employment that would result in a loss of almost 34,000 jobs, while emissions would be reduced by only 0.6%.

The minimum impact that the application of the tax would have on emissions has to do with the type of flights that would be most affected by the measure. The tax would increase prices, which would have a negative impact on demand. Its contraction would affect more short and medium-haul flights, which are the flights that most tourists who come to Spain take and are the most sensitive to rising prices. This circumstance would cause greater damage in the regions most dependent on air transport such as the Canary Islands, the Balearic Islands, Ceuta and Melilla. Interestingly, the report concludes that these flights are the ones where there is a lower concentration of emissions.

For the specialists of the ETSIAE, the reduction of domestic flights is “very ineffective in terms of reducing _CO2 emissions”. Domestic flights represent 12% of _CO2 emissions, with 63% of them corresponding to flights between non-peninsular territories and between islands, closely dependent on air transport. For this reason, flights that can be replaced by some form of land transport only represent 4.4% of the emissions caused by the total number of flights operated in Spain, he explains.

Experts from the Polytechnic conclude that environmental taxes are “inefficient” for the purpose of reducing aviation’s carbon footprint. Something that has also influenced the International Civil Aviation Organization (ICAO), which advocates making minimal use of the tax tool. The optimal solution to reduce its impact passes, according to the document, by greater efficiency of aircraft (an annual improvement of more than 2% has already been achieved), optimizing operating procedures and more efficient air navigation in Europe, which involves implementing the so-called Single European Sky. Also for the progressive introduction of competitive biofuels and for the hybrid and electric aircraft in the medium and long term. In any case, it argues that the solution must be global and not national.

Source: Reason