Monday, July 28, 2008

Taxing for the Environment?

Over the past several months, the Aviation Law Blog has provided commentary on the ongoing legal battle over the so-called "environmental tax" the Dutch government has imposed on all flights departing the Netherlands. By imposing a €11.25 fee (€45 for those outside Europe), the Netherlands claims it can help offset the effects of aviation on the environment. The key problem with this line of reasoning is that nothing in the legislation establishing the tax specifies where the money it generates goes or how it will be used. And while the government may claim publicly that the €350 million a year the tax is expected to raise is meant to compel travelers to have a nice, long ponder over the environmental costs of flying, it doesn’t alter the fact that the tax itself is likely illegal. As Frans Vreede, a partner in the Dutch law firm of Boekel De Nerée, argued in a guest post on this blog, the tax appears to violate Article 15 of the Chicago Convention and may, in fact, be contrary to the principles set forth in the 2007 U.S./EU Air Transport Agreement. Despite this, the tax has survived two court challenges, being most recently upheld by the Dutch Court of Appeals in The Hague.

The economic impact of the tax could be devastating. The Netherlands’ Schiphol Airport expects a halt to its growth to result from the tax and will prevent the creation of as many as 10,000 jobs. There are further worries that the volume of departing passengers will experience an overall decline for the remainder of 2008. In fact, a recent report sponsored by the Dutch government believes the tax will adversely impact Schiphol’s competitiveness with airports in neighboring EU countries. Airlines as well are expected to feel the brunt. Air France-KLM is expecting as large a drop as a million Dutch passengers while the low-cost carrier EastJet anticipates a 15% reduction. In light of the problems the tax is expected to cause, it is not surprising that the European Low Fares Airline Association has strongly condemned the tax, noting the bitter irony that low-cost carriers—arguably the most environmentally efficient in the EU—are poised to be the hardest hit by the new charges.

If the legal and economic problems presented by the tax aren’t enough to call it into question, there is also the practical reality that, in the words of International Transportation Association President Giovanni Bisignani, "[t]axes don’t reduce emissions[,] [o]nly better operations and technology…do." One has to be suspicious then of such a hefty imposition which is expected to send many millions of euros into the national treasury rather than being earmarked for investment in clean technologies or improving airport infrastructure. Regardless of the final outcome of the continuing legal battle over the tax, at some point the adverse effects of this tax (coupled with its embedded irrationalities) will catch up to it. By that time, aviation in the Netherlands may have suffered irreparable harm, consumers’ pocketbooks will have been needlessly stretched, and Mother Earth, the purported recipient of this allegedly beneficent charge, won’t be breathing any easier.

July 28, 2008 | Permalink | Comments (0) | TrackBack (0)