Europe opposes air travel tax

The European Union executive’s decision appeared to be the death knell for a levy on airline tickets, which drew criticism from many member states and airlines even when finance ministers agreed on 14 May that it would only be voluntary.

 

The ministers asked the commission to prepare a proposal for their 7 June meeting, but a commission source said on Wednesday the analysis of the idea would not be submitted, even though it was ready.

 

“The Commissioners decided today they did not want to send the proposal. At least 10 Commissioners disagree with the whole idea of a voluntary airline tax,” the source said.

 

Commission President Jose Manuel Barroso will have to explain the decision, a rare defiance of member governments’ wishes, to Luxembourg Prime Minister Jean-Claude Juncker, who holds the EU presidency and will chair the 7 June meeting.

 

The voluntary airline tax, to be levied on flight tickets sold in the European Union, had drawn criticism from Austria, the Netherlands and holiday destinations Italy and Greece.

Only a handful of countries said they would definitely implement it.

Dead horse
 

Dutch Finance Minister Gerrit Zalm said last month the plan was “a dead horse”. 

Barroso will have to explain the decision to EU president

 

Its demise would be a fresh blow to Britain‘s hopes of putting together a substantial package of increased development aid during its presidency of the Group of Eight nations ahead of a UN summit in September on eradicating poverty.

 

The optional charge on airline tickets was already a step back from the mandatory levy on air travel or kerosene fuel that French President Jacques Chirac originally proposed in January, with backing of German Chancellor Gerhard Schroeder.

 

But it was seen as a way to break the ice on what might one day become a broader tax to help Africa.

 

Rich nations have agreed to increase assistance to Africa and the developing world to 0.7% of gross national income by 2015, but with EU countries’ average aid spending at roughly half that target, they need to raise extra money.

Extra source

 

An air travel tax was to be an extra source of aid funding on top of regular development assistance from national budgets.

 

It would have helped fund the International Finance Facility for Immunisation (IFFIm) – a body set up by donor countries which would issue bonds to raise cash to buy vaccines.

 

The IFFIm is seen as a pilot project for a broader development fund raising scheme, proposed by British Finance Minister Gordon Brown, which could help double aid to $100 billion annually through issuing debt.

 

But financing for the repayment of the bonds is a problem as some countries worried it would further weigh down their already bloated budget deficits.