Business opposes airline ticket tax

  • 24 February 2006

The International Chamber of Commerce today condemned proposals for a tax on airline tickets to raise funds for development aid and said there are better ways for business and government to help lift people out of poverty.

Speaking on behalf of business people around the world, ICC Secretary General Guy Sebban said: “New economic opportunities are needed, not a new tax. Removing barriers to trade, investment and entrepreneurship in an open market should remain the preferred means of achieving long-term development.”

A three-page statement elaborating ICC’s views said that the protection of agriculture in many developed countries increases the need for aid in the developing world and directly counteracts the effects of official and other development aid.

“In particular, reducing export support to agriculture in developed countries and improving market access for agricultural imports from the developing world will diminish the need for development aid and free funds that might be used for Official Development Assistance,” the statement said.

French President Jacques Chirac, who proposed the air ticket tax, is convening a ministerial conference in Paris on 28 February to encourage more countries to implement the proposed tax.

France has announced it will begin levying the tax on 1 July 2006 and is pushing for other countries to follow suit. When the plan is introduced, flight tickets originating in France will be subject to a tax of between 1 to 40 euros per passenger depending on the flight class and destination.

The ICC statement, drafted by its Corporate Economists’ Advisory Group, also said such a tax, exclusively targeted at the aviation industry and airline travellers, would be arbitrary, detrimental to that particular industry, and would cause serious economic distortions. It would impose new competitive challenges on a sector already suffering from heavy losses as a result of cyclical and external difficulties, despite recovering growth rates.

ICC said: “The rationale for taxing airline tickets is likely based on the premise that air transport is a good enjoyed by the well-off. However, in practice such a tax would be particularly painful for low-income households who represent a growing segment of air transport users and are already very sensitive to ticket prices.”

ICC national committees throughout the world are delivering the ICC statement to their governments, urging them to reject the tax and to work toward poverty reduction efforts based on the proven strategies of democratic accountability, open markets, transparency, rule of law and sound economic policies.

ICC and its member companies have taken a variety of initiatives to help achieve the Millennium Development Goals, a set of objectives that range from halving extreme poverty to halting the spread of HIV/AIDs and providing universal primary education.