Global Policy Forum

There is increasing support for moves to allow EU governments to impose taxes on aviation fuel. On 8 December, the European Parliament's Economic and Monetary Affairs Committee confirmed that it will be supporting, at its session on 13 December, the European Commission's view that aircraft fuel should be subject to tax. In response to the Commission's Communication on the taxation of aircraft fuel (COM(2000) 110), the Committee, in its Resolution, will support the recommendation to allow the Member States to impose such a tax on domestic and intra-EU flights, on environmental grounds.

At the same time, the Committee also recognises that for competitive reasons such a tax should not be unilaterally introduced on intra-EU flights only. It said it is "urging the Commission to pursue negotiations through the International Civil Aviation organisation with a view to amending the Chicago Convention which allows an exemption from taxes for aircraft fuel".

The issue of taxation of aircraft fuel is currently governed by Council Directive 92/81 (EEC) on the harmonisation of the structures of excise duties on mineral oils. Article 8 paragraph 1 of this Directive requires Member States to exempt mineral oils from the harmonised excise duty when they are supplied for use as fuels for the purpose of air navigation other than private pleasure flying. Article 8 paragraph 7 requires a review of this exemption by the Council based on a report and proposal by the Commission. This report should take account of the external costs entailed in such means of transport and the implications for the environment.

There are two main legal constraints on the introduction of a tax on aircraft fuel. The first results from the 1944 Chicago Convention, which states in Article 24 that "fuel, lubricating oils, spare parts regular equipment and aircraft stores on board an aircraft of a contracting state (...) shall be exempt from customs duty, inspection fees or similar national duties or charges". The ICAO Council of 14 December 1993 confirmed that not only goods already on board the aircraft, but also fuel embarked on aircraft destined for another State shall be exempt and that excise duties and sales and consumption taxes where also included. All EU Member States are members of ICAO (International Civil Aviation Organisation) and have to abide by this regulation.

The second constraint results from the numerous bilateral Air Service Agreements (ASAs), which exist between individual Member States and also between Member States and third countries. These agreements govern the treatment of fuel loaded on to an aircraft and usually contain a clause to the effect that both fuel in transit and fuel supplied in the territory of the contracting party are exempt from fuel taxes.

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