Ryanair may have to pay back €10m in travel tax
RYANAIR could have to pay the Exchequer as much as €10m after the European Commission ruled the airline -- as well as Aer Lingus and Aer Arann -- unjustly benefited from a two-tier travel tax introduced by the government in 2009.
Mandarins in Brussels yesterday told the Government that it would have to recoup money -- likely to total about €20m -- from the three carriers as a result.
The Fianna Fail government introduced a passenger tax for airlines in March 2009 as it sought ways to shore up the nation's finances.
The Budget move meant airlines were charged a €10 tax per passenger on all flights departing the country whose destination was more than 300km from Dublin. A lower €2 fee was imposed for each passenger on flights departing from Ireland whose destination was less than 300km from Dublin. The lower rate was perceived to be in place mainly so that domestic air routes wouldn't be severely affected.
Aer Arann -- which now operates all its flights under the Aer Lingus Regional banner -- was operating subsidised domestic routes between Dublin and Galway, Derry, Sligo, Donegal and Knock at the time the travel tax was introduced. All its flight destinations were less than 300km from the capital. The lower €2 rate also affected flights from Dublin to places such as Cardiff, Glasgow, Prestwick, Liverpool, Manchester, Blackpool and the Isle of Man.
The two-tier tax rate was in place until March 2011, when a flat €3 rate was introduced for all passengers departing from Ireland regardless of how far away their destination was.
But the European Commission said that when the lower €2 rate was in place alongside the €10 rate, the system favoured flights within Ireland and nearby parts of the UK. It said yesterday that this had given airlines operating such flights an "economic advantage over their competitors and thus distorting competition in the internal market".
"To ensure a level playing field between airlines, the commission ordered Ireland to recover this advantage from all airlines that had benefited from it," it said.
That effectively means that, in each instance where only €2 in tax per passenger was taken by the Exchequer, a further €8 must now be paid retrospectively by the airlines.
A spokesman for the Department of Finance said the Government will now consider the impact of the decision.
Ryanair insisted yesterday that it would have "no material exposure" to any potential recovery by the Exchequer. However, the Irish Independent understands that it will have to pay about half of the €20m that could have to be handed over by the airlines.