Cash-strapped Italy Slaps Tax on Bizjets

 - February 4, 2012, 5:20 AM

Italy’s parliament has approved plans for a new tax on all business aircraft, regardless of country of registration, as part of the effort to reduce the country’s massive national debt. Business aviation interests expect to learn the details of how the legislation will work by the end of February, but it could impose a tariff of several hundred thousand dollars on the owner of a large jet that spends more than 48 consecutive hours in the country. The tax will apply only to privately owned aircraft and will exclude those operated under commercial air operator’s certificates (AOCs) and also aircraft operated by governments and for purposes such as emergency medical services.

Aircraft weight will determine the magnitude of the tax. Those weighing less than 1,000 kg (2,205 pounds) will be charged €1.50 per kilogram, but the rate will rise steeply with weight: an aircraft that tips the scales at more than 10,000 kg (22,046 pounds) will be assessed at €7.55 per kilogram. For example, the tax on a Bombardier Learjet 60 would be €80,480; for a Boeing Business Jet it would rise to €585,620. Unclear at this stage is whether the tax would be levied each time an aircraft spends more than 48 consecutive hours in Italy or would be a one-off charge.

Fabio Gamba, chief executive of the European Business Aviation Association, has condemned the tax as an ill-considered move that will penalize non-Italian operators while raising little revenue for Italy’s deeply indebted government. The Italian government has estimated that it could raise up to $50 million per year from the tax, but Gamba told AIN that revenue would be much lower in practice because operators will find ways to circumvent liability or simply avoid keeping their aircraft in Italy for more than 48 hours. For example, operators visiting northern cities such as Milan could quite easily reposition their aircraft across the border at Swiss airports such as Ticino.

Swiss attorney Franco Campomori regards the legality of the tax as “highly questionable.” He told Corporate Jet Investor magazine: “Action will be taken for the relevant authorities to acknowledge the potential disruptive effects and hopefully introduce mitigating measures at least within the implementing legislation.”

But Gamba sees little chance of overturning the tax with a legal challenge. He points out that nine European Union states now levy, or plan to levy, special taxes on aviation, with the UK set to extend airline passenger duty to private aviation beginning in 2013. He said that most Italian-registered business aircraft will be exempt because they tend to operate on commercial AOCs.