Part of the recently announced package of austerity measures
announced by the German government prior to its parliament's
summer break, is a proposal to raise a new tax on all flights
departing from German airports. The draft bill, which is currently
before the German parliament, states that the purpose of the new
tax is to encourage environmentally friendly practices. Thinly
disguised as a measure to help safeguard the environment from
harmful aircraft emissions, the real reason for the proposal is the
urgent need to reduce the budget deficit in Germany which exists as
a result of the recent economic crisis. If it becomes law, the new
tax is predicted to bring in up to 1 billion Euros per year for the
The new tax, which would come into force from January 2011,
would make airline tickets up to 26 euro per flight more expensive
for long-haul flights and 13 euro per flight on short-haul routes.
This means that a passenger travelling on a domestic return flight
would be taxed on both legs of the journey. It was originally
anticipated that the proposal would seek to apply the tax on a
sliding scale determined according to ecological reference points.
Despite the draft legislation now proposing a fixed tax, some
attempt to retain a link to the environmental concerns which the
tax seeks to address has been retained as it is still determined by
reference to the duration of a flight.
The tax will not apply to all flights as cargo and military
flights are exempt from the new tax as are flights whose sole
purpose is to serve the national interest. The only other
exemptions relate to passengers under the age of two who do not
travel in their own seat and transfer passengers whose point of
origin is outside of Germany. This exemption has been included at
the behest of amongst other Lufthansa AG who feared that passengers
originating from outside the EU would otherwise choose to fly with
competitors such as Air France, KLM and British Airways and use
non-German hubs for their transfers. Other airlines have also
criticised the proposals and threatened to move their operations to
other nearby airports outside of Germany thereby avoiding the
It is conceivable that the Ministry of Finance may reduce the
level of taxation from 2012; certainly this is foreseen by the
draft legislation. From this point airlines operating to and from
the European Union (EU) will be subject to the EU
emissions trading scheme. However, the level of any reduction is
likely to depend on the amount of income which the State earns as a
result of the emissions trading scheme (ETS).
Should the amount raised by the EU ETS be less than the announced
target figure of one billion euros which the new tax is predicted
to bring in, then the new tax will only be reduced to a level which
ensures that the target is still met.
One of the most interesting proposals in the draft legislation
concerns foreign operators who fail to nominate an entity
responsible for the payment of the tax. In such cases the owner
[and operator] of the aircraft are responsible for the payment of
the tax. In effect therefore owners and lessors of aircraft are
potentially taking tax risk on their lessees. Should this provision
be retained when the legislation is passed into law, then it is
certainly a matter that will need to be addressed in relevant
Matthias Weigert is an associate in the Corporate Finance team
and Jonathan Mullender is an associate in the Banking team, Norton
Rose LLP, Munich.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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