Taken from the IAOPA-Europe e-newsletter, January 2007
The European Commission has ordered states to conform to standard tax levels on general aviation fuel in an extraordinary decision which threatens to damage flight training, end alternative fuel research and drive more general aviation companies to the wall.
The EC is demanding that all states impose a minimum of 0.45 euros per litre in tax on avgas and has rejected requests from France, Portugal, the United Kingdom, Malta and Sweden for ‘derogations’ to allow their current tax levels to remain.
The effect in some countries will be dramatic. In Sweden, the price of avgas is expected to almost double, while in Britain – where the cost of flight training is already the highest in the world among countries which have a significant flight training industry – costs will be driven higher and more flight training will be lost to America.
Flying costs are hugely disparate across Europe, and higher taxes will make the situation worse rather than better. In Britain, a student pilot can expect to pay 160,000 euros for an integrated ATPL course with type rating which would allow him or her to apply for an airline job. By contrast, in Germany avgas is heavily taxed and the price of fuel is higher, but the airlines pay for flight training – Lufthansa trains 300 pilots a year at its own expense. In Britain, the aviation industry meets the entire cost of the Civil Aviation Authority, a massive drain on general aviation resources, while in other European countries such ‘services’ are free. And everywhere, conventions on retail margins are vastly different.
In Sweden there is no tax on avgas, partly in recognition of the fact that oil companies there have invested millions of euros to create unleaded and ETBE avgas – a research program which is no longer affordable under the EC’s tax regime. Consumption in Sweden is expected to fall by 50 percent as the retail price, currently around 0.90 euros a litre for unleaded avgas, almost doubles. By convention, the rule of thumb is that a tax increase should be doubled to find where the price will settle. Tax increases reduce consumption while overheads remain the same, and distribution efficiencies disappear. The EC’s tax sledgehammer is particularly inappropriate in the tiny avgas market, where specialist companies provide fuels in pharmaceutical quantities.
Avgas production in Europe equals one quarter of the motor fuel that evaporates from car tanks. Revenues from the additional taxes will be utterly negligible, and as some countries have pointed out, will cost more to collect than they will raise. Portugal sought an exemption on these grounds. Malta cited competition from non-EC countries, to whom we are exporting our flight training industry. The United Kingdom made the same point, while complaining of compliance costs and raising the issue of safety, as users were tempted to forsake avgas for motor fuel. Sweden quoted the requirement for access to remote communities, and the need for affordability in flying to foster currency and therefore safety. The EC, however, brusquely dismissed every request, and failed even to consider those from Denmark and Poland at all.
While the EC’s tax directive describes avgas as being used for “private pleasure flying” its definition is so loosely written that few users will escape. Some GA companies are worried that their national governments will raise taxes beyond the EU minimum, using the EC order as an excuse, and several national AOPAs have scheduled meetings with their governments to try to keep the damage to a minimum.
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