Excise duties on mineral oils (kerosene tax)

Excise duties on mineral oils (kerosene tax)

The EU is still pointing at the international level (ICAO) as the proper forum for a kerosene tax and does not want to take steps by itself (i.e. introduce an EU-wide kerosene tax). For the RPAT-Campaign this means that we have to wait now for the results of ICAO General Assembly (September 22 - October 2, 1998) and to support the EU-demand for a global kerosene tax at this meeting. If the introduction of a kerosene-tax fails at ICAO - which is likely - we should then pressure the Environment and Transport Council of the EU to introduce a kerosene tax (or other charges) at the EU level.

EXCISE DUTIES ON MINERAL OILS (KEROSENE TAX)

Background:

Aviation fuel (kerosene) is exempted from excise duties. This common practice has been laid down in many bi-lateral Air Service Agreements (SAS) between countries. This decision is also laid down in an EU Directive, which is currently under revision.

Commission Directorate responsible:

DG XXI (Finance).

Proposal for a Council Directive: Restructuring the Communities Framework for the Taxation of Energy Products (COM(97) 30 final).

Developments:

A proposal for the revision of the Directive says that the Commission suggests that the taxation of kerosene should be considered in the relevant international fora', and that the Commission considers that the relevant Community legislation should be amended to require the Council to extend excise duties on mineral oil to aviation kerosene as soon as the international legal situation allows the Community to levy such a tax on all carriers including those from third countries'.

So the Commission says that it cannot introduce a tax for all carriers until the rules are changed at the international level (by ICAO - the International Civil Aviation Organisation - and in bi-lateral Air Service Agreements). However, this was disputed by the Institute for Air and Space Law in the study A European Environmental Aviation Charge'.

The proposal would allow taxation of kerosene on domestic flights and within the European Community if the countries involved would agree on that in bi-lateral Air Service Agreements.

However, given the fact that the EU is one market now, it would be possible for the EU to introduce an excise duty on kerosene for all EU carriers for flights within the EU. The EU doesn't want to do that because it says that this would mean a distortion of competition for EU carriers.

During a Transport Council on March 12, 1997, it was agreed that the Commission would be asked to undertake a study on taxation of aviation. This proposal was later approved by the Ecofin Council (Finance Ministers). The study (DG XXI) will deal with the possibilities and impact (environmental, economic, others) of introducing a kerosene tax within the EU. Later the Commission was contemplating a broader study on the possibilities and impact of introducing an aviation charge within the EU. The first study mentioned above will start in June 1998. It is unclear when it will be released and what the possible outcome might be. The second study has not yet started.

Update

The June Environment Council of the EU expressed its desire to see major progress on this issue and urged the Commission to hurry up with its study on the consequences of a possible introduction of a kerosene tax, which is now expected for November/December 98.