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EU Member States Eye Tax Response to Private Jet Outrage

By: Elodie Lamer

 

French and Belgian officials have called for an EU response to the public outcry linked to celebrities' and billionaires’ flights in private jets, sometimes for very short trips.

 

“You wanna take mine or yours?” says a picture on Instagram in which Kylie Jenner stands between two planes. All summer, websites tracking celebrities’ flights, such as Flightradar24, have shown that they use their private planes for trips as short as 17 minutes.

 

“For the five first months of this year, it’s about 50,000 flights with private planes which have started in the six Belgian airports, or the equivalent of the whole year 2021!” Georges Gilkinet, Belgium's transport minister and deputy prime minister, tweeted August 19. “Those flights are mostly short distance, so hardly justifiable," he added. According to Gilkinet, a private plane flight causes on average 14 times more pollution than that of a classical airliner and 50 times more pollution than the same trip by train.

 

Welcoming public outcry linked to the data on Flightradar24, Gilkinet asked how governments can justify drivers paying fuel tax and households paying heating tax while those who can afford private planes are exempt from kerosene tax. He said he would push at the EU level to get its exemption removed from the energy taxation directive. His comments are consistent with the Belgian coalition agreement, which says the government will commit at the EU and international levels to a review of the tax exemption on kerosene.

 

In France, the flights of the biggest companies and richest individuals emitted an estimated 520 metric tons of CO2 in July, which is equivalent to what an average individual would emit in 52 years, the French newspaper Le Monde reported on August 17. Transport Minister Clement Beaune told Le Parisien on August 20 that the EU should regulate private planes, while French Green National Secretary Julien Bayou called for an outright ban on private planes in the French newspaper Liberation on August 19 and added that the tax exemption sends “a clear message: impunity for the richest.” Beaune also said extending the EU’s emissions trading system (ETS) to include private jets could be an option.

 

The energy taxation directive (ETD) provides that aviation fuel is exempt from energy taxation. Fuel used for private pleasure flying of private jets is taxed at the rate applicable to motor fuels. The definition of private pleasure flying is a determining factor: It means the use of an aircraft by its owner or the natural or legal person who enjoys its use either through hire or through any other means, for other than commercial purposes and, “in particular,” purposes other than the carriage of passengers or goods. Observers note that to capture the private jets that made headlines during the summer in the scope of the ETD, EU institutions should target business flights. In July 2021 the European Commission proposed that all business flights and pleasure flights be taxed, at least, at the minimum rate assigned to motor fuels (€10.75/GJ). This tax would apply from the start of the application of the reviewed directive, while intra-EU passenger flights would get a transitional period of 10 years before being subjected to the tax.

 

The commission takes the taxation rules for private pleasure flights seriously. In 2006 it refused to grant a derogation to Finland, Denmark, and Ireland, which wanted to exempt fuel used for flights in private pleasure craft from tax. In 2012 it also sued Ireland because the country kept exempting fuel used by disabled persons for motor vehicles from excise duty after the end of the foreseen transition period at the time. It must be noted that any tax on flight tickets can be introduced at the national level and doesn't need an EU agreement.

 

Regarding the ETS, it already sets a carbon price on emissions from private jet flights within the European Economic Area, unless the flights are operated by a noncommercial operator that emits less than 1,000 metric tons of CO2 per year or by a commercial operator that has fewer than 243 flights per consecutive period of four months or emits less than 10,000 metric tons of CO2 annually. The commission wants to keep these exemptions in the reform of the ETS that is being negotiated.

 

Getting EU member states to agree on carbon pricing for kerosene will not be easy. France and Belgium are asking for two different things: The tax idea of the Belgians must be dealt with within the ETD, and the French idea on the ETS would be a separate proposal. This indicates that there is not a united front at this stage. Some countries are fiercely opposed to a kerosene tax — mainly islands and countries with islands. During the summer, the Maltese press published various stories raising concerns about the impact a kerosene tax might have on the tiny island. On August 14 The Sunday Times of Malta estimated that the ticket price for a return flight from Malta would increase by about €45 by 2030 under the tax. It says it would impede the freedom of movement of Maltese citizens and connectivity.

 

The Czech presidency of the EU Council is not expecting an agreement on the proposal under its presidency.

 

The airline industry is also raising the alarm. “Airlines for Europe (A4E) and its members strongly believe that the ETS is the preferable mechanism for putting a price on aviation emissions, when compared to a European framework of national kerosene taxes," A4E told Tax Notes. The group said it believes the diverging taxes on kerosene that member states would introduce based on new minimum rates would undermine the single European market for air travel. “The EU will have no influence to ensure that national revenues from a kerosene tax are reinvested in sustainable mobility," A4E said. It also asserted that a kerosene tax applicable to intra-EU flights only would lead to more CO2 emissions as a result of detours and other efforts to avoid the scope of the tax.

Company Tax Notes
Category FREE CONTENT;ARTICLE / WHITEPAPER
Intended Audience CPA - small firm
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Published Date 08/25/2022

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