Sunday 4 December 2016

EC battles Aer Lingus and Ryanair over €16m in taxes

Published 06/04/2016 | 02:30

The EC wanted Ryanair to pay the Government €12m in air taxes, and Aer Lingus to pay €4m.
The EC wanted Ryanair to pay the Government €12m in air taxes, and Aer Lingus to pay €4m.

The European Commission will tomorrow argue in court that Ryanair and Aer Lingus should be forced to hand over as much as €16m to the Government arising from the implementation of the now suspended air travel tax.

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The Commission had previously argued that the way Ireland's air travel tax was structured meant shorter air routes had effectively benefited from illegal state aid.

It also wanted Ryanair to pay the Government €12m in air taxes, and Aer Lingus to pay €4m.

But last year, the two airlines successfully overturned the Commission's previous determination to that effect.

The EC will now plead at the European Court of Justice that its original finding should be retained and that the airlines must pay up.

The Government introduced the controversial air travel tax in 2009. The urgent revenue-raising measure was pilloried by airlines that claimed it would hinder passenger growth.

The new tax levied a €2 charge per passenger on flights up to 300km from Dublin, and €10 for distances over that. But Ryanair complained to the European Commission. The institution determined that the lower levy rate amounted to illegal state aid, because it benefited airlines that primarily operated shorter routes.

Following the Commission's ruling, the Government scrapped the two-tier levy system and in 2011 introduced a flat €3 tax per passenger.

The air travel tax was then suspended in 2013, prompting Ryanair to expand its services out of Ireland.

But the European Commission then told the Government that it would have to collect from both Aer Lingus and Ryanair, the difference between the two rates - €8 - that had previously been in operation, in respect of each passenger that had been charged the lower €2 levy between 2009 and 2011.

That was meant to equalise the levy that had been charged to ensure that no airline had had an unfair financial benefit.

Ryanair and Aer Lingus both successfully appealed that decision to the European Union's General Court, saving them millions of euro each.

At the time, the European Court of Justice stated that the Commission had not established to the requisite legal standard that the recovery of €8 per passenger was necessary in order to ensure the re-establishment of the status quo if all flights had paid the same charge.

"The recovery of an amount of €8 per passenger from the airlines could not ensure the re-establishment of the situation which would have prevailed if the operations in question had been carried out without the grant of the aid concerned, since it is not possible, for the airlines, to recover retroactively from their customers the €8 per passenger which should have been collected," the European Court of Justice ruled.

But the European Commission wants the ruling overturned, and lodged an appeal against the General Court's ruling last June. It's relying on one ground for its appeal.

The Commission claims that by creating a new economic test to be applied when determining the amounts to be recovered from beneficiaries of State aid consisting of a tax measure fixing a lower rate by reference to a standard rate, that the General Court violated existing regulations. It's likely to be months before a ruling on the appeal is made public.

Irish Independent

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