Brussels considers new tax on aviation fuel

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The Independent Online

Jacques Barrot, the incoming European Union transport commissioner, yesterday sent a tremor through the aviation industry by suggesting a curb on the tax exemption for jet fuel.

M. Barrot said that, once the surge in oil prices has subsided, the issue of taxing aviation fuel for internal EU flights should be examined. In a hearing at the European Parliament in Brussels, M. Barrot said: "We need to come back to the problem of the tax exemption for jet fuel when tensions on the oil price abate. Would it not be possible to introduce a low rate of tax on intra-EU flights not exposed to international competition?"

M. Barrot is due to take over the transport brief on 1 November. His ideas echo those of environmentalists who argue that trains and other forms of transport are not competing with the airlines on a level playing field because the air operators do not pay tax on aviation fuel.

But, with airlines in the US exempt from fuel taxes, European governments know the new duty would put their airlines at a competitive disadvantage. Applying a levy only for internal EU flights would reduce that problem, since only European airlines operate these routes. But all 25 EU governments would have to back the plan, and that is unlikely. Alternatively countries could reach bilateral agreements, levying the same tax on flights between them.

M. Barrot's initiative might prove difficult to administer if airlines had to operate under two regimes, with international flights exempt, but EU routes liable to the new duty.

Steve Double, the head of news for British Airways, said: "It would be unwelcome and would add costs at a time when everyone is ... struggling to keep their heads above water."