Dutch Plans of an EU-wide Air Passenger Tax won't fly High with Consumers
Last month, the Dutch government began circulating a position paper suggesting the EU should introduce a Union-wide air passenger departure tax on flights departing from the European Union. The paper promoted by the Netherland’s Secretary of State for Finance Menno Snel suggests a 7 EUR per passenger flight tax be rolled out within all Member States. Then, the funds should be allocated to the national budgets of the respective airport of departure. Snel argues that this tax would 'disincentivize passengers from frequently using low-cost' carriers and make more Europeans switch to trains.
While France, Belgium, and Finland support this initiative to create an EU-wide tax, passengers should be worried about this massive fiscal intrusion of tax authorities in the daily choices of consumers. Several European countries already have hefty air passenger departure fees.
The United Kingdom's Air Passenger Duty ranges between 13 and whooping 150 GBP for each flight, pushing many Brits to take the train to take flights elsewhere, often Brussels or Paris.
The German Luftverkehrabgabe ranges between 7 and 42 EUR and has decreased in the past years. The Netherlands had a similar tax over a decade ago and got rid of it as passengers were commuting to nearby airports in Germany and Belgium. That move ushered in a loss of up to one billion Euros to the Dutch airline economy.
Looking at the map, one sees that mainly wealthy Northern European countries have introduced such taxes but not a single Eastern European country, save for southern Italy. The liberalization of air travel within Europe and the emergence of low cost carriers and massive competition within the airline industry have allowed millions of European to use planes for either leisure or economic activities.
Economic migrants and commuters from Eastern Europe can visit their families more often and more cities are connected to the rest of the continent. Assuming that a European tax would move more of these travel patterns to the rail neglects the realities of European rail networks and actual distances to travel. Passengers flying from Bucharest to Brussels will hardly be able to use buses or trains for this journey.
More remote European countries such as Bulgaria, Greece, Portugal, or Spain would also suffer from such a mandatory air passenger tax. Given that many of the countries without an existing tax rank below the average EU income, its introduction would over-proportionally hit low income households and families. Rich western EU Member States mandating high taxes on emerging economies seems to be a recipe for discord. The EU28 has nearly 1.5 billion departing air passengers a year. The Dutch plans would cost European consumers 10 billion Euros a year and likely ground many Europeans’ plans to visit friends or study abroad.
Countries with this tax usually saw a reduction of passenger numbers between 1 and 2 percent. This means not just that many passengers won't be able to afford air travel anymore, but it may also be the nail in the coffin of many struggling European airlines.
In times of rising populism and many European economies being at the brink of a new recession, policy makers should instead focus on how to underscore the value of the Single Market and the European Union.
Introducing Union-wide taxes and limiting consumers' choice and purchasing power is not the right way to win back the hearts and minds of people.
By Fred Roeder, Managing Director of the Consumer Choice Center