Malta resolute not to introduce EU air tax

Malta does not agree with the imposition of a new tax on air fares as the one proposed by certain EU member states, even if on a voluntary basis, because such a move will harm the island's tourism industry, sources close to the government said yesterday.

The sources said the government has made it clear, more than once, that Malta will not introduce this measure.

During a statement to the press after an informal meeting of EU finance ministers last Saturday in Luxembourg, the president of the Council, Luxembourg's Prime Minister Jean Claude Juncker said the ministers had agreed to impose a levy on air travel to fund development aid in Africa.

Prime Minister Lawrence Gonzi said The Times Malta made it clear at the meeting it did not agree with such a proposal.

Government sources explained that the formal EU proposal still needs to be drafted by the Commission and presented to the Council where Malta, together with other member states, are set to oppose the tax. According to EU rules a new tax can only be introduced following unanimous agreement.

The suggested scheme is one of a number of proposals the EU is evaluating in order to meet promises to slash global poverty. Prime Minister Juncker said this will be a voluntary contribution which some member states propose to turn into a mandatory levy.

The idea echoes French President Jacques Chirac's plan for a one-dollar tax on airline tickets, proposed in January at the World Economic Forum in Davos, Switzerland. That scheme was thought to be unworkable. However, restricting the levy to the EU would not require changes to international agreements.

A special report drafted for the finance ministers argues that a tax on airline tickets would be relatively simple to implement on a flat rate basis on all flights and would have no significant avoidance problems.

The proposal suggests that a tax of €10 (Lm4.37) on EU flights and €30 (Lm13.11) on international flights could raise €6 billion a year but EU ministers expect the levy to be significantly lower.

Belgian Finance Minister Didier Reynders said the contribution could only be of €1-2.

The proposal has the support of a number of countries, including France, Germany, Spain and Belgium, however, several member states including Malta, Austria, Greece, Ireland and Hungary are deeply opposed, citing the practicality of the plan and possible damage to their tourist industries.

Europe's airlines fiercely opposed Saturday's decision, saying they would fight to dump the proposal. Air Malta had already told The Times, when the original proposal was made, it opposes the idea and the position did not change following Saturday's meeting.

The Association of European Airlines, which represents 31 European airline companies including Air Malta, reacted angrily to the EU decision. Ulrich Schulte-Strathaus, the AEA's secretary general, said the industry is struggling to recover from five years of consecutive losses and one cannot tax an industry back to sustainable recovery.

The issue on the levy on airline tickets will be revisited in June after the Commission puts forward its own ideas on the proposal.