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Taxing aviation fuel

Published Tuesday, October 22, 2019

At present, although road fuel is charged excise duty, which represents a substantial proportion of the pump price paid by motorists, aviation kerosene (AVTUR) which is used in jet engines is exempt from tax. 

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Many commentators have argued that the tax-exemption of jet fuel is an indefensible anomaly, given that aviation accounts for a growing share of greenhouse gas emissions.  However, there are several obstacles to taxing aviation fuel.  First, it is probable that unilateral moves by the UK to impose duty on this category of fuel would be contrary to EU law.  Second, it is likely that even an EU-wide agreement on taxing this fuel would have a limited effect.  Imposing duty on all flights - not just domestic ones within the EU - would pose the threat of ‘tankering’ – that is, carriers filling their aircraft as full as possible whenever they landed outside the EU to avoid paying tax, and so increasing the level of aviation emissions.  Finally, the tax-exemption of aviation fuel is subject to long-standing international agreements, and although there have been some discussion as to the case for amending these, progress has been very slow.[1] 

In its 2003 white paper on aviation the Labour Government argued that bringing aviation within the EU Emissions Trading Scheme (ETS) represented the most effective response to the growth in emissions.[2]  In December 2007 Member States agreed that aviation would come into the scheme from 2012,[3] and this approach to controlling emissions was endorsed by for its part by the Coalition Government.[4]  In answer to a recent PQ on the case for charging excise duty and VAT on aviation fuel, Treasury Minister Robert Jenrick said, “members of the International Civil Aviation Organisation (ICAO), including the United Kingdom, are prevented from taxing international aviation fuel, or any proxies for fuel, under the Chicago Convention. However, Air Passenger Duty – which raised £3.4bn in 2017/18 – ensures that the air travel sector contributes to the cost of public services.”[5]

Last year the current Government published a green paper on its long-term aviation strategy. The relative share of the UK’s greenhouse gas emissions from aviation is forecast to rise significantly, from around 7% at present to possibly 25% by 2050.[6] The paper discussed the Government’s approach to tackling emissions from the aviation sector, noting that “international action is the first priority for tackling international aviation emissions” and that it would “continue to lead efforts in ICAO to negotiate for robust, environmentally effective emissions reduction measures that minimise market distortions and address the sector’s emissions in the most cost-effective way.”[7] However the paper makes no mention of the possibility of taxing aviation fuel.

In September this year the Committee on Climate Change published advice to the Government on tackling emissions from international aviation and shipping,[8] in the context of the UK’s ‘net zero target’ (a target for at least a 100% reduction of greenhouse gas emissions, compared to 1990 levels, in the UK by 2050).[9] In answer to a PQ on 1 October George Freeman, Minister of State at the DfT, stated, “we are carefully considering this advice and its implications for Government policy and we will shortly publish a consultation on aviation and climate change.”[10]

Notes : 

[1]     As noted recently in a written answer, “members of the International Civil Aviation Organisation (ICAO), including the United Kingdom, are prevented from taxing international aviation fuel, or any proxies for fuel, under the Chicago Convention.” PQ255293, 21 May 2019

[2]     Department for Transport, The future of air transport, Cm 6046 December 2003 para 3.40

[3]     For more background see, EU ETS: Including Aviation, Commons Briefing paper CBP5533, 23 May 2012

[4]     For example, see HM Treasury, Reform of Air Passenger Duty: a consultation, March 2011 para 3.9

[5]     PQ255293, 21 May 2019. For more details on this tax on UK passenger flights see, Air passenger duty: recent debates & reform, Commons Briefing paper CBP5094, 14 February 2019.

[6]     HMG, Aviation 2050: The future of UK aviation - a consultation, Cm 9714, December 2018 para 1.24

[7]     op.cit. para 3.82, para 3.88

[8]     Committee on Climate Change, Letter: International aviation and shipping and net zero, 24 September 2019

[9]     For details see, Legislating for net zero, Commons Briefing paper CBP8590, 27 June 2019

[10]    PQ291460, 1 October 2019

Commons Briefing papers SN00523

Author: Antony Seely

Topics: Aviation, Taxation

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