French airport tax draws sharp all-round criticism

European aviation industry says taxes to hurt its NetZero moves
/ New Delhi
French airport tax draws sharp all-round criticism

ACI Europe immediately called upon the French Government to reconsider its plan to add an additional tax on the revenues earned by the airports

Days after the Netherlands government announced new taxes on passengers at Schiphol Airport, the European aviation industry has been hit by another tax, this time by the French government’s tax on airports and roads that will kick-in from January 1, 2024, proposed as part of the new budget currently under discussion in the Parliament.
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Earlier this week, before French Finance Minister Bruno Le Maire presented the budget for the year 2024, the expectations of any bad surprises in terms of new taxes were rather low as the country, along with rest of Europe, is facing a tough recovery, mainly thanks to energy crisis and food inflation, which has stubbornly continued to rule high enough to force the European Central Bank raise its reference rate to a record high last month.

And since aviation and tourism are two critical sectors of the French economy, which have yet to recover fully from the trauma of a prolonged shutdown during the three years of Covid-19 pandemic, they were amongst the least prepared to face the proposal of new taxes on airports and autoroutes that Le Maire included in his budget.

The response was sharp and immediate and not just from France, but across Europe, since the French proposal comes just days after the Dutch government imposed its own new tax on all passengers arriving at Schiphol Airport, even those transiting through the key European aviation hub.

ACI Europe, the European level association of airport operators immediately called upon the French Government to reconsider its plan to add an additional tax on the revenues earned by the airports of Paris, Nice, Marseille, Lyon and Toulouse.

ACI Europe said that the tax would reduce the capacity of these airports to finance their ambitious decarbonisation plans, aiming to achieve net zero for CO2 emissions under their control between 2026 and 2030. It also risks impacting their competitive position and their connectivity, with negative repercussions for their local economy, ACI Europe warned.

Olivier Jankovec

“This is yet another initiative from the French Government targetting aviation and labelled as ecological, but which would in fact hit both decarbonisation efforts and the economy. Squeezing airports that are leading decarbonisation efforts for tax revenue is ill-advised and amounts to policy greenwashing. Achieving net zero for European aviation will require more than EUR 820 billion in investments across the entire eco-system comprising aircraft manufacturers, airlines, airports and air navigation service providers. Further taxing the sector will only make such investments more difficult and threatens our shared goals,” said Olivier Jankovec, Director General of ACI Europe, in a rather blunt statement.

Le Maire said that the new tax on large airports would earn the French government EUR 600 million a year and said, “The best funding for investments in ecological transition is to ensure that those who pollute more contribute more.”

He tried to calm voters by assuring that this increase in taxation would not be passed on to the users thanks to the maintenance of toll rates. He also tried to soften the blow on the airlines saying that the government had decided not to increase the ‘ecological’ tax on air tickets that it had imposed in the pre-pandemic era and which was expected to rise this year.

However, the largest airport operator in the country, Aeroports de Paris (ADP), immediately said that it would pass on a majority of the tax burden to airlines and which in turn would pass it on to travellers.

ADP estimates that around 75 pc of the costs would thus be passed on, but specified in a press release that the increase in prices of the fees paid by the airlines would be spread over two to three years.

“A first increase, covering almost half of the impact of the tax, would take place from the 2024 tariff period and then additional increases would take place in the following tariff periods,’’ said ADP, which says the new tax would curtail its operating profit of 2024 by EUR 90 million.

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