Lower taxes on international air transport are essential for the recovery of the industry

Ilia Lioutov by Ilia Lioutov | Mar 17, 2021

The ACI Policy Brief on Taxation of International Air Transport and Airports demonstrates a fundamental imbalance between the government revenue proceeds from passenger-based taxes and the foregone economic benefits that exceed the taxation proceeds by a factor of two. An estimated $90 billion (figures in USD) in passenger-based taxes is accompanied with a $183 billion reduction in the combined direct, indirect, induced and catalytic economic impact due to the foregone traffic, based on traffic volumes for the year 2019.

Policy Brief: Taxation of international air transport and airports ─ Economic benefits and costs
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Fiscal policies can stimulate the recovery of the aviation sector

In 2021, the industry was expecting reasonable recovery based primarily on the rollout of several vaccines and mass inoculation of people against coronavirus in all parts of the world.  However, as of early 2021, the pace of vaccination has been slower than expected, and a high proportion of the global population remains restricted under lockdowns and hence unable to travel. Many national borders remain closed to travel, air services are largely cut, and traffic is being catastrophically suppressed.

These are exceptional times for the air transport industry, and they require appropriate industry solutions and policy decisions to facilitate recovery in a sustainable manner.

One of such tools ACI suggests deploying lies in the fiscal domain. The vast majority of studies on aviation taxation policies, including ACI’s Policy Brief and its key findings, based on research and analyses from InterVISTAS Consulting Group, arrive to the same conclusions:

  • International civil aviation is heavily taxed
  • A substantial share of aviation taxed levied across the globe are economically inefficient
  • Very often, aviation taxes are not compliant with ICAO’s policies on taxation (Doc 8632)
  • Tax regimes are unnecessarily complicated and distort competition

Most importantly, these studies suggest that removing excessive taxes will result in incremental traffic volumes and jobs, as well as unlocking further economic benefits. This argument is especially compelling now, as the air transport industry, being an industry with a high economic multiplier and a significant economic driver, is depressed.

ACI’s commitment to advocate for more effective aviation taxation policies

Taking stock of the evidence-based and data-driven analyses in the ACI Policy Brief on Taxation of International Air Transport and Airports and building on the policy recommendations put forward by ACI, the 30th World Annual General Assembly of ACI unanimously adopted the new ACI’s economic policies in the 10th edition of the ACI Policy Handbook.

Consistently, the overarching taxation policy statement from the airport community in the Handbook is that the proliferation of various taxes and duties on airports, passengers and air transport, as well as disproportionate or unwarranted airport concession fees and rents to governments, represent an impediment to air transport.

ACI Policy Handbook, 10th edition – 2020
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Ilia Lioutov

Ilia Lioutov

Senior Expert, Airport Economics and ESG at ACI Asia-Pacific
Ilia Lioutov is an air transport economist with in-depth expertise in economic and financial performance of airports and is currently a Senior Expert, Airport Economics and ESG at Airports Council International (ACI) Asia-Pacific. His core responsibilities include formulating advocacy strategies at national and international level and representing the airport industry interests within political, economic and regulatory institutions. Lioutov is the secretary for the ACI sub-committee on non-aeronautical revenues and activities (ANARA).
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