Wednesday, September 16, 2009

Indirect Taxes on International Aviation

Blog readers may be interested to read a recent working paper by Michael Keen and Jon Strand of the International Monetary Fund.  See Indirect Taxes on International Aviation (IMF Working Paper No. 06/124, May 2006) (available through SSRN here).  From the abstract:

This paper examines the case for internationally coordinated indirect taxes on aviation (as a source of general revenue-not (necessarily) as a source of development finance). The case for such taxes is strong: the tax burden on international aviation is currently limited, yet it contributes significantly to border-crossing environmental damage. A tax on aviation fuel would address the key border-crossing externalities most directly; a ticket tax could raise more revenue; departure taxes face the least legal obstacles. Optimal policy requires deploying both fuel and ticket taxes. A fuel tax of 20 U.S. cents per gallon (10 percent, at today's fuel prices, corresponding to assessed environmental damage), or alternatively ticket taxes of 2.5 percent, would raise about US$10 billion if imposed worldwide, and US$3 billion if applied only in Europe.

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