Monday 14 October 2019

Price of plane tickets could soar under Dutch and French Vat plans

 

Jet fuel is currently exempt from Vat in Ireland and other EU countries, a major tax break for the region’s airlines, including Ryanair and Aer Lingus. Photo: PA
Jet fuel is currently exempt from Vat in Ireland and other EU countries, a major tax break for the region’s airlines, including Ryanair and Aer Lingus. Photo: PA
John Mulligan

John Mulligan

Irish consumers could face higher air fares if the Netherlands and France succeed in persuading other EU members to end tax exemptions on aircraft fuel and plane tickets.

Jet fuel is currently exempt from Vat in Ireland and other EU countries, a major tax break for the region's airlines, including Ryanair and Aer Lingus.

But with low-cost air travel having spurred a surge in passenger numbers and flights, there are calls for the tax breaks to end in an effort to make the European Union carbon neutral by 2050.

No Vat is charged by EU member states on airline tickets either.

Even if a lower rate of Vat was applied, and aircraft fuel was taxed, the cost per airline ticket could easily jump by up to 20pc.

Ryanair is Europe's biggest low-cost carrier and stimulates demand by having low fares.

Adding Vat to fuel and tickets could dramatically alter the dynamic for cheap air travel in Europe.

The Netherlands wants agreement on steps toward ending the near complete lack of taxation on air travel and France is also pushing for an end to tax breaks on jet fuel, as European leaders discuss carbon neutrality at a summit in Brussels.

"The new president of the Commission will have to present plans for the fight against climate change in Europe," said Dutch deputy finance minister Menno Snel.

"It is a no-brainer that the possible contribution of the aviation sector will be put on his agenda in the first week in office."

If no EU deal is found, the Netherlands plans to introduce a €7.50 ticket tax for departing passengers from 2021.

Friends of the Earth estimates that, between 1990 and 2016, aviation emissions more than doubled while overall emissions fell by 43pc.

Low aviation taxes, more budget airlines and the rise of Airbnb have led to a boom in intra-European city trips.

Research has shown that if the price of air travel goes up by 1pc, demand will likely fall by about 1pc, according to IMF tax policy division head Ruud De Mooij.

Irish Independent

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