Every hour European governments lose out on €4 million in aviation taxes, according to a new report published by Transport & Environment. Aviation pays no kerosene taxation, little to no ticket taxes or VAT and a carbon price on intra-European flights only. The report found that, if left unaddressed the aviation sector benefits from tax exemptions that will rise in value by 38% in the next three years.
The study revealed European governments lost out on €34.2 billion in revenue last year due to low levels of taxation in the aviation sector. This €34.2 billion could pay for 1,400 km of high-speed rail infrastructure – equivalent to the distance from Hamburg to Rome. The analysis looked at the revenues that would have been raised from air travel pricing if the sector did not benefit from exemptions. It compares these revenues with those that were actually raised in a year. This is defined as the ‘tax gap’.
In order to close the gap, 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. 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.