Economic and sustainability impacts of an aviation tax

This report presents an analysis of the economic and sustainability impacts of an aviation tax. These impacts were examined for three main variants, broken down into ten subvariants, for 2021 and 2030, against two background scenarios.

In all the variants the aviation tax has a modest positive impact on Dutch economic welfare, GDP and CO2 emissions. This holds for both background scenarios.

The impacts of the aviation tax are relatively modest. This is because the tax itself is likewise fairly modest (several percent of the average ticket price) and because of the serious capacity restrictions at Schiphol Airport, in particular. Without an aviation tax, these restrictions lead to higher profits for airlines. The tax will be paid for largely by the airlines from these higher profits.

As a result of the capacity restrictions, an aviation tax will not lead to fewer flights but to a shift in traffic segments (passenger/freight, OD/transfer, European/intercontinental destinations). This means the tax will have only a modest impact on CO2 and particulate emissions and noise.

Given the revenues accruing to government, in all the variants and scenarios the tax, in the form investigated, will increase overall economic welfare. These welfare gains stem mainly from some of the tax revenue coming from foreign airlines and passengers, and because depressed demand due to the tax will lead to alternative, non-aviation consumption expenditures (in the Netherlands) that are taxed.