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22 Oct, 2007

Condemnation of Air Passenger Tax Unwarranted & Unsound

The Pacific Asia Travel Association (PATA) and the International Air Transport Association (IATA) have joined hands in “condemning” the Dutch Government’s plan to tax outbound passengers by as much as EUR45 as part of an effort to reduce air travel and combat global warming.

However, the knee-jerk condemnations are flawed, self-serving and indicative of an intellectual myopia not very different from that plaguing the bureaucrats these travel industry organisations claim to criticise.

IATA Director General and CEO Giovanni Bisignani called the passenger tax “ineffective, inappropriate and a breach of international obligations.”

Referring to it as “a thinly disguised tax grab that does nothing for the environment,” he recommended that the Dutch Government look at tax credits to incentivise innovation and bring more efficiencies into the air traffic control system to reduce congestion.

Jumping in with a me-too statement, PATA President and CEO Peter de Jong claimed that innovation, not taxation, is the way forward.

Urging that travel & tourism should not bear “a disproportionate burden of the fight against global warming simply because it is an easy target,” he claimed that “innovative, self-funding, energy-saving initiatives will always be a more effective way of reducing emissions.”

Both those arguments are imperfect and unsound, designed more to protect the interests of the industry these “visionary leaders” and “strategic thinkers” claim to represent, rather than the environment.

Not only is there no evidence to indicate that an aviation tax will have any impact on travel volumes, on the contrary, if well used, it can be extremely beneficial for the purpose it is intended to serve.

Air travel’s only advantage over rail and road transport is the ability to cover longer distances faster. In the process, it emits far more greenhouse gasses (GHG) measured on a per capita per kilometre basis.

According to President of the Council of the International Civil Aviation Organization (ICAO), Mr. Roberto Gonzalez, “ICAO’s latest forecast for the next 20 years calls for average annual increases of 4.6 per cent for passenger traffic and 6.6 per cent for cargo traffic. Under present operating conditions, air transport will definitely pollute more than today, in spite of the remarkable fuel efficiency gains of the past 40 years.”

If the massive GHG emissions by airports as well as by cars and buses making millions of pick-up and drop-off trips are factored into the overall emissions by air transport, it begins to look far more deadly than surface transport.

Although travel organisations cry foul at the mere mention of the word ‘tax’, they never shake a fist at the oil companies, speculators, traders and brokers who are primarily responsible for the nearly tripling of fuel prices in the last two years.

Mr Bisignani once thundered that airline bottom lines would be severely affected by each cent added to the cost of fuel. That warning has flopped big time. The airlines ruthlessly cut costs elsewhere and passed on the higher fuel costs to the consumers via surcharges. At the same time, low-cost airlines continue to offer cheap deals and seat-giveaway campaigns.

Airlines also shout much too loudly about increases in airport charges even though these are an infinitesimal portion of their overall costs.

Moreover, institutions such as the Asian Development Bank are constantly pushing for “realistic pricing” strategies for other resources like water because they say it makes consumers less wasteful. That argument should be just as applicable in the case of oil, an equally important resource as water.

What organisations like IATA and PATA fail to do is to convert calls for a fuel-tax on aviation into an advantage. Indeed, the cheapest and most cost-effective way is to offset the GHG emissions via mitigation measures. Prudently applied, an aviation tax could be phenomenally useful.

If imposed globally in smaller amounts on a pro-rate basis, an aviation tax may well generate enough funds in a week to put solar-powered electricity panels on, say for example, the roofs of every Indonesian village.

That, in turn could help bring down the cost of solar-panels to a level that could be afforded by villages in Africa, especially if developed countries can subsidise the costs instead of subsidising their own farmers.

Alternately, the organisations could insist that money only be used to fund the planting of millions of trees in the vicinity of global airports, especially alongside or between the many miles of access roads.

If consumers have no qualms paying huge fuel surcharges that only contribute to oil industry profits, they should have no problem paying a small tax as an environmental protection measure.

There is no shortage of simple and innovative solutions first. Unfortunately, these organisations suffer from tunnel-vision and prefer to organise big-ticket conferences on climate change which are really designed to more to fill the coffers of the organisers and promote the profiles of their chief executives rather than reduce GHG.

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