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IATA report on aviation taxes and charges criticised

19th January, 2006

A report on aviation taxes and charges has been published by the industry lobby group, IATA. Its aim seems to be to head off threats to impose taxes on aviation. The report is highly misleading. The report by IATA (International Air Transport Association) is called, IATA Economics Briefing No 2 – Aviation Taxes And Charges’, was published in Nov 05.The document is, as one would expect, a lobbying document. Its aim seems to be to head off threats to impose taxes on aviation.“The aviation industry creates substantial economic value. Governments already reap the benefits airlines provide to economies. We are a heavily taxed industry. We must ensure that unjustified new tax proposals do not add to this burden.”The upshot of the study is “This report shows that the aviation sector currently pays a significant amount in terms of both taxes and user charges. Indeed, airlines already pay in full – and more – for their associated infrastructure costs. By contrast, rail and urban transit networks are heavily subsidised. Road users do pay a higher total amount of tax, but typically make a lower net contribution than the aviation sector on a per journey basis.”There are some fundamental flaws in the report:

  • The comparison confuses the issue by adding taxes to charges for the cost of infrastructure.
  • The report argues that because aviation “creates substantial economic value”, users should pay low taxes and charges. There is no economic justification for this argument.
  • The report make great play of the fact that rail travel is highly subsidised. This is already well known and there are well-understood social, economic and environmental reasons for this. Comparison of aviation and rail contributes nothing to the debate.
  • The report shows that road transport is taxed much more heavily than air transport. However, IATA spins this to show that taxes and charges are much higher for air than road on a per-trip basis. This is an absurd comparison, since air trips are typically many hundreds of miles while road trips are typically just a few miles.
  • There is no attempt to calculate external costs. The report tries to argue that costs should not be charged because the industry is trying hard to reduce environmental impacts and because there are economic benefits from air travel.

For a fuller critique (two page) see link below.Critique of IATA report (Word doc, 2 pages).