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Indirect Taxes on International Aviation

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  • Mr. Jon Strand
  • Mr. Michael Keen

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.

Suggested Citation

  • Mr. Jon Strand & Mr. Michael Keen, 2006. "Indirect Taxes on International Aviation," IMF Working Papers 2006/124, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2006/124
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    Cited by:

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    5. Margit Schratzenstaller & Alexander Krenek, 2016. "Sustainability-oriented EU Taxes:The Example of a European Carbon-based Flight Ticket Tax," WIFO Studies, WIFO, number 58888, February.
    6. Csereklyei, Zsuzsanna & Stern, David I., 2020. "Flying More Efficiently: Joint Impacts of Fuel Prices, Capital Costs and Fleet Size on Airline Fleet Fuel Economy," Ecological Economics, Elsevier, vol. 175(C).
    7. Mundaca, Gabriela & Strand, Jon & Young, Ian R., 2021. "Carbon pricing of international transport fuels: Impacts on carbon emissions and trade activity," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
    8. Alexander Krenek & Margit Schratzenstaller, 2017. "Sustainability-oriented tax-based own resources for the European Union: a European carbon-based flight ticket tax," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(4), pages 665-686, November.
    9. Schleiniger, Reto, 2016. "Implicit CO2 prices of fossil fuel use in Switzerland," Energy Policy, Elsevier, vol. 96(C), pages 411-420.
    10. Cohen, Maurie J., 2010. "Destination unknown: Pursuing sustainable mobility in the face of rival societal aspirations," Research Policy, Elsevier, vol. 39(4), pages 459-470, May.
    11. Stern, Lennart, 2023. "The Optimal Taxation of Air Travel under Monopolistic Dynamic Pricing," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277667, Verein für Socialpolitik / German Economic Association.
    12. Alou Adessé Dama & Vianney Dequiedt & Audrey-Anne de Ubeda & Grégoire Rota-Graziosi, 2023. "Taxation of civil aviation fuels as a source of financing for vulnerable countries [La taxation des carburants de l’aviation civile comme source de financement à destination des pays vulnérables]," Working Papers hal-04021052, HAL.
    13. Don Fullerton & Andrew Leicester & Stephen Smith, 2008. "Environmental Taxes," NBER Working Papers 14197, National Bureau of Economic Research, Inc.
    14. Jiali Zheng & Han Qiao & Shouyang Wang, 2017. "The Effect of Carbon Tax in Aviation Industry on the Multilateral Simulation Game," Sustainability, MDPI, vol. 9(7), pages 1-24, July.
    15. Piotr Niedzielski & Magdalena Zioło & Jarosław Kozuba & Ewa Kuzionko-Ochrymiuk & Natalia Drop, 2021. "Analysis of the Relationship of the Degree of Aviation Sector Development with Greenhouse Gas Emissions and Measures of Economic Development in the European Union Countries," Energies, MDPI, vol. 14(13), pages 1-16, June.
    16. Álvarez-Albelo, Carmen D. & Hernández-Martín, Raúl & Padrón-Fumero, Noemi, 2017. "Air passenger duties as strategic tourism taxation," Tourism Management, Elsevier, vol. 60(C), pages 442-453.
    17. Ben Cherniavsky & Benjamin Dachis, 2007. "Excess Baggage: Measuring Air Transportation’s Fiscal Burden," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 242, February.
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