THE BLOG

Airlines Fly Through Tax Loopholes While Burning Up Planet

11/09/2013 11:45 BST | Updated 10/11/2013 10:12 GMT

Flying is often the cheapest, quickest and most convenient way to get to that beach, city break or weekend away. Unfortunately it's also the cheapest and quickest way to heat the planet!

Aviation accounts for about 5% of all global warming; its emissions are so large that considered as a country, it would be the world's 7th largest emitter of CO2, between Germany and South Korea.

Despite its huge emissions, little has been done by the international community. 17 years of discussions at the responsible UN body, ICAO, has yet to result in any action to regulate emissions. In the meantime, the EU decided it needed to act to on its runaway emissions. But a storm of international protest orchestrated largely by Washington obliged Europe to back down and give ICAO more time. Just last week we heard that the latest proposal from across the pond is to permanently castrate the EU's action by slashing the emissions reductions to less than a half - without any guarantee that ICAO will deliver on global emissions.

Also, though it may seem that everyone is flying these days, aviation remains predominately a pastime of the well-off: a 2011 report shows the average household income of UK leisure passengers travelling from a predominantly low cost carrier airport like Stansted was more than a third higher than the UK average. The income disparity at airports like Heathrow is presumably much greater.

Meanwhile the debate over whether the aviation industry deserves the multiple subsidies it receives in Europe heats up. First among the lavish concessions is that aviation fuel is not taxed: drivers pay on average 40p per litre to fill up the family car while the average EU flight receives an £8,000 tax-break every time it fills up. This is a £27 billion fuel tax break across the EU every year for both EU and foreign carriers. Moreover there is no VAT on airline tickets, which costs EU countries well over £6 billion a year in lost revenue and means higher taxes for all to make up the shortfall!

In addition it's now becoming apparent that aviation receives at least £2.5 billion a year in 'State Aid' - direct subsidies from EU taxpayers - but quite likely very much more. The EU has very strict rules as to when and how states can grant such subsidies to industry. For aviation these rules ban any country from funding day-to-day operations at airports. The European Commission now openly admits that its rules have been flaunted for years by national and local authorities keen on having a local airport. Whether an airport is needed or can make money doesn't seem to matter. But instead of enforcing the rules, the Commission intends to do the opposite; sanction billions in past illegal aid and legitimise these practices which squander taxpayer money for a further "transitional" 10 years.

All these egregious tax breaks not only distort competition, deplete government coffers and inflate wage taxes, they accelerate climate change by boosting passenger numbers through artificially cheap tickets. Aviation's emissions in the EU have expanded dramatically, particularly from the low-cost sector operating from highly-subsidised regional airports. We estimate that the additional CO2 generated by these subsidised flights is probably greater than the amount of CO2 that the EU's aviation climate regulation was supposed to reduce.

With accelerated changes to our climate, urgent action is required by the EU to end all tax breaks for aviation. The tax loopholes have no demonstrable benefit for European citizens, also apply to foreign tourists and airlines and lead to all of us, rich and poor, to involuntarily subsidise those who fly through lower take home pay.

At the very least the fastest growing and most climate intensive from of travel should pay its way just like all the other sectors of the economy. Taxing the poor so that the rich may heat the planet about the fastest way possible doesn't add up. Welcome to the tax-free world of aviation.