Taxes in the Field of Aviation and their impact

This study reviews aviation-related taxes in the EU and selected non-EU countries. It also estimates the economic and environmental impacts of these taxes and of tax exemptions.

In EU Member States, VAT or other taxes on domestic aviation are the most prevalent and exist in 17 Member States. Six Member States levy taxes on international aviation, invariably in the form of ticket taxes for passengers departing from airports in the Member State. The highest average tax rates are in the UK, followed by Italy, Norway, Germany and France.

Taxes lower demand and have economic and environmental impacts. This study has developed a model to provide a global indication of some impacts.

The modelling shows that tax exemptions for the aviation sector lead to higher passenger demand, aviation sector growth (in terms of both jobs and value added) and more flights. It also shows that abolishing the current exemption from energy taxation on aircraft fuel would, if it were feasible, result in a 10% increase in average ticket price and an 11% decline in passenger demand. This would have a negative impact on employment in the aviation sector and on value added: in both cases an 11% reduction. Aviation CO2 emissions would decrease by 11% and the number of people affected by airport noise by 8%. The higher fiscal revenue would entirely offset the adverse impacts on aviation employment and value added, leading to an only negligible impact on employment and GDP.

The report has been written by CE Delft in collaboration with SEO. 

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