While the Airlines companies operating in France denounce the numerous air taxes (airport, noise pollution, solidarity, civil aviation, etc.) which are already imposed on them by the State, theNGO Transport & Environment (T&E) believes, on the contrary, that France deprived of 4.7 billion euros in 2022 by granting aviation tax loopholes.
T&E’s analysis focuses on the revenue that would have had to come from air transport if the sector did not benefit from so many exemptions. The study compares these potential revenues with those actually collected over the course of a year. This is what T&E calls the ” miss to win “.
In France, there is no tax on kerosene and only domestic flights are subject to reduced VAT. Although having the merit of existing, the tax on tickets is too low compared to these exemptions (1). Finally, like the other EU countries, the polluter-pays principle implemented with the carbon market contains loopholes: airlines benefit from free allowances (2) and long-haul flights (extra-EU) do not are not covered.
1.9 billion euros in tax exemptions for Air France
Of the 4.7 billion euros in lost revenue for the State, 1.9 billion euros should have been collected from Air France’s activity, all taxes included. This tax loophole sustains an airline business model based on traffic growth through artificially low prices. And after the Covid-19 state aid, it constitutes a public subsidy for a polluting mode of transport which only benefits part of the population.
” By allowing the airline sector to benefit from significant tax loopholes, France is depriving itself of precious resources to decarbonize the country. Air France-KLM is making near-record profits in 2022, generated by burning fossil fuels in the sky. However, the current French tax is not enough to compensate for the tax advantages enjoyed by the sector. Rather than dragging the issue under the rug by arguing for a global ticket tax, Emmanuel Macron had better start by ending these tax exemptions in France“, explains Jérôme du Boucher, aviation manager at T&E France.
6.1 billion euros lost in 2025
Without any reform of air taxation, the shortfall for France will increase by 30% by 2025, as the air sector recovers. Eurocontrol estimates that traffic will reach 92% of pre-Covid levels in 2023 and recover fully in 2025. Potential uncollected revenue could then reach 6.1 billion euros, according to T&E.
” Closing the gap to finance the green transition and addressing the undertaxation of aviation should be a top priority for the government », Estimates the environmental NGO. It therefore recommends removing the fuel tax exemption, applying the normal VAT rate of 20% to all tickets and extending the carbon market to all flights. These changes would fill the revenue gap calculated by T&E.
Pending their implementation, T&E proposes to immediately raise the ticket tax to a level that would offset the exemptions. For First or Business class, for example, this tax on tickets must amount respectively to €183 for European flights and €864.20 for flights outside the European Union.
A prerequisite for decarbonizing the sector
The T&E study shows that higher taxes will have an impact on passenger ticket prices. This could lead to lower demand and reduced CO2 emissions. The end of exemptions in Europe in 2022 would have avoided the emission of 35 million tonnes of CO2, with an even higher total climate impact if we take into account the so-called “non-CO2” effects of aviation, which represent up to two thirds of the sector’s climate problem. ” As aviation seeks to decarbonise, tax revenues should be partly reinvested in clean technologies, such as synthetic jet fuel “, recommends the NGO.
(1) France levies taxes on tickets (a solidarity tax, an eco-tax and a fiscal tax in Corsica) and applies a 10% VAT rate on domestic flights. Revenues from the Civil Aviation Tax (TAC) as well as the airport tax are not taken into account in the calculation of the shortfall, since they are entirely reinjected into the aviation sector, via the budget of the air traffic control and operations.
(2) This is the EU Emissions Trading Scheme (EU ETS). Airlines benefit from free allowances, but these do not cover all of their emissions. The companies must therefore buy the rest of their allowances on the market. After 2026, the free allowances will be completely abolished.
