Dutch Government Sets Rates for New Aviation Tax

 - May 14, 2019, 3:40 PM

While continuing to lobby for an EU-level aviation tax, the Dutch government has decided to move ahead with plans to introduce a new national tax on passenger and cargo flights departing from airports in the country starting in 2021.

State Secretary for Finance Menno Snel published a draft bill May 14 that proposes a flat-rate aviation tax of €7 per departing passenger—transit passengers and infants under two years old are exempt—and a charge based on the maximum takeoff weight (mtow) of full-freight aircraft indexed to the noise level. Under the legislative proposal, belly freight appears exempt. The proposal would set a rate for the noisiest category of full freighters at €3.85 ($4.31) per ton of mtow and €1.925 for less noisy aircraft. The majority of cargo flights, 85 percent, currently fall into the highest noise category, the ministry of finance said.

The draft bill follows a commitment of the governing coalition for a “greening” of its tax regime and to make the aviation sector more sustainable. The Netherlands imposed a ticket tax in 2008 of €11.25 for flights within the EU or for distances no longer than 2,500 kilometers and €45 for flights beyond that distance but scrapped it just a year later following a fall in passenger numbers.

The Dutch government argues the situation differs markedly now and that its past aviation tax came in the midst of a financial crisis that compounded the contraction of traffic. Currently, demand exceeds infrastructure capacity at airports in the country, it noted. In addition, several EU countries have introduced an aviation tax, thereby lessening the threat of traffic leakage from Dutch airports to neighboring airports. Germany and Austria introduced a ticket tax in 2011, Norway followed in 2017, and Sweden in early 2018. The UK and France have imposed aviation taxes since the 1990s. Italy also imposes an aviation tax.

The Dutch government said it would abandon its national aviation tax if the EU commits to an EU-wide aviation tax because aviation crosses borders. It floated the idea at a meeting of transport ministers earlier this year, but the European Commission said it would not take the initiative to draft and submit a proposal under the current tenure as European parliamentary elections take place later this month. The Dutch government, however, continues its efforts and has organized a high-level conference in The Hague on the topic with the support of Belgium and France for June 20 to 21.

At the European level, it identified the following options for an aviation tax: the introduction of value-added tax (VAT) on cross-border passenger air transport; the introduction of excise duties on fuels for commercial aviation; and the introduction of a flight tax. The Dutch government perceives only the latter option as realistic in the short- to mid-term, noting that the debate on an EU-wide VAT on international passenger tickets has gone on for 25 years without any result.

Taxing aviation at the EU level—specifically fuel and VAT on all, not just domestic, tickets—has become a major topic of debate in Europe and several political parties or candidates to become the next EC president have included it in their election manifestos. An official petition has called on the EC to propose to the bloc’s member states the introduction of a tax on aviation fuel. “The aviation sector enjoys tax advantages despite being one of the fastest-growing sources of greenhouse gas emissions,” it claims.

Brussels-based NGO Transport & Environment on Monday called “indefensible” Europe's “unique and deplorable status as a kerosene tax haven.” The European aviation sector remains heavily undertaxed compared with other regions, it said, based on findings in a leaked report financed by the European Commission. “Local and foreign airlines in Europe have never paid a single cent of excise duty on the fuel they take on at EU airports,” said the group. “Airlines are not even taxed on domestic flights. In contrast, jet fuel taken on for domestic aviation has been taxed for many years in countries such as the U.S., Australia, Japan, Canada, and even Saudi Arabia.”

Transport & Environment said the study shows that taxing aviation kerosene sold in Europe would cut aviation emissions by 11 percent, or 16.4 million metric tons of CO2 a year, and result in “no net impact on jobs or the economy as a whole while raising almost €27 billion in revenues every year.”