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Sustainability-oriented EU Taxes: The Example of a European Carbon-based Flight Ticket Tax
Austrian Institute of Economic Research (WIFO). (FairTax)
Austrian Institute of Economic Research (WIFO). (FairTax)
2016 (English)Report (Refereed)
Abstract [en]

Taxing the aviation sector at the EU level and using the resulting revenues to reduce Member States’ contributions to finance the EU budget presents itself as a huge opportunity not only to decrease carbon emissions effectively, but also to reform the EU system of own resources. The aviation sector is a small but fast growing emitter of carbon dioxide. The failed attempts of several EU Member States to introduce a flight ticket tax and the pressure on those EU Member States still levying such a tax clearly demonstrate the limits of national aviation taxation. Assigning any kind of taxes on flight tickets to the EU level would greatly reduce the tax enforcement problems inherent to mobile tax bases and put a stop to harmful tax competition between EU Member States. A double dividend, consisting of a reduction of CO2 on the one side and a boost for the economy on the other side, is a likely scenario if additional tax revenues are spent in the right way. Therefore, in this paper it is proposed that all revenues from a European carbon-based ticket tax should be used to reduce contributions of Member States to the EU budget. This would allow national governments to reduce taxes more harmful for growth and employment, in particular the high tax burden on labour. Given the current political and legal situation a European carbon-based ticket tax has better chances of implementation compared to a tax on aviation fuel and is therefore a financial instrument which could foster sustainable growth in the very near future. The paper estimates the expected revenue from implementing a carbon-based flight ticket tax at the EU level and revenue distribution across EU Member States. In particular, we propose that every passenger departing from an airport within the EU and every passenger arriving from outside the EU at an EU-based airport is subjected to this new carbon tax which is calculated individually for every route flown. The paper uses a new and very exact data set, which (depending on the country) assigns to approximately 75% to 90% of the respective intra and extra EU routes flown in the year 2014 the corresponding carbon dioxide emissions per passenger (using the ICAO methodology). Based on the demand elasticities provided by IATA (2007), we are thus able to exactly calculate the tax revenues per passenger per route that could have been generated in 2014 by introducing a carbon-based flight ticket tax in the EU.

Place, publisher, year, edition, pages
Umeå: Umeå universitet , 2016. , 39 p.
FairTax: Working Paper Series, 01
Keyword [en]
EU system of own resources, flight ticket tax, EU taxes, carbon tax, sustainability-oriented taxation
National Category
Law and Society
Research subject
URN: urn:nbn:se:umu:diva-120832OAI: diva2:930270
EU, Horizon 2020, 649439
Available from: 2016-05-23 Created: 2016-05-23 Last updated: 2016-05-23

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