The aviation sector benefits from unjustified tax exemptions that, if left unaddressed, will rise in value by 38% in the next three years. If Belgium were to tax aviation ‘fairly’, this would yield 700 million euros for the state treasury. This was calculated by the European environmental umbrella organization Transport & Environment (T&E).

Today, aviation tax is unfair: in Belgium, for example, the sector pays no tax on kerosene, little to no ticket taxes or Value Added Tax, and a carbon tax on intra-European flights only. T&E, therefore, analyzed what the revenue for the government would be if the sector were taxed correctly, taking into account the enormous climate impact of aviation.

Heavier burden

According to T&E, in Belgium, the gap between actual revenues and what taxes would yield to the sector in the absence of exemptions is 700 million euros. By 2025, this amount could rise to 950 million euros. European governments lost 34,2 billion euros in revenue last year due to deficient levels of taxation in the aviation sector.

This would be enough to pay for 1 400 kilometers of high-speed rail infrastructure, the distance between Hamburg and Rome. Therefore, T&E and environmental organization Bond Beter Leefmilieu (BBL), one of T&E’s members, plead for a heavier burden on the aviation sector.

Less noise, pollution, and health problems

“It will increase ticket prices and reduce demand for air traffic, which in turn will result in less damage to health from particulate matter and noise pollution, and a reduction in CO2 emissions,” both organizations say.

The four European countries where the tax gaps are the largest are the UK, France, Spain, and Germany, mainly reflecting the size of their aviation sectors. The UK and French governments would have cashed in an extra 5,5 and 4,7 billion euros if aviation was taxed adequately.

Air France and Lufthansa

Although France, Germany, and the UK levy a ticket tax, their low levels of ticket taxation aren’t able to fill the gap. Due to the size of their activity, Air France and Lufthansa are the two most significant contributors to the tax gap in Europe.

Closing the gap and addressing aviation’s under-taxation should be an utmost priority for governments. The study recommends applying a fuel tax on kerosene, a 20% VAT rate on tickets, and extending the carbon market for aviation to all departing flights.

Harmful flying habits

These changes would help to close the gap in government budgets. In the absence of these measures, T&E recommends applying a ticket tax equivalent to the gap in each country.

Jo Dardenne, aviation director at T&E, concludes: “Taxation should not be perceived as a punishment but as a way to fairly charge those who benefit most from aviation’s under-regulation. Those better off in society have been paying far too little for their flying habits. […] It’s time to end the era of cheap flying and the growth in emissions.”