EU finance ministers study airline tax plans

Europe's finance ministers agreed yesterday to study plans for taxing aviation fuel or slapping a levy on airline tickets, despite the opposition of air carriers and deep divisions among EU governments.

At the meeting in Brussels yesterday, the European Commission was asked to come forward with a proposal.

The Commission is already on record as supporting the idea, although Jacques Barrot, the EU Transport commissioner, said this week that any proposal should not put European airlines at a disadvantage to their competitors. Last year he suggested that a tax on intra-EU flights would satisfy that criteria because it would create a level playing field.

Aviation fuel is exempt from tax - one reason why Germany and France, backed by the Luxembourg presidency of the EU, have identified it as a potential source of development revenue for the Third World. But European airlines argue that any move to introduce one would play into the hands of competitors who can purchase fuel outside the EU.

Most diplomats are highly sceptical about reaching an agreement on a tax or levy among all 25 member states. That analysis was reinforced yesterday when 10 countries, including Spain, Greece and Finland, registered reservations of some sort, including fears that a tax would disadvantage European airlines, hit regional airports or deter tourism. Britain and Ireland have yet to take a position.

Germany's Finance minister, Hans Eichel, said "something has to be done" about cheap flights when a taxi ride from the centre of Berlin to the main airport can cost more than a plane ticket.

The European Low Fares Airline Association argued yesterday that the link between aviation and development aid is highly questionable.