France’s ‘Solidarity Tax’ on air travel is a major source of funding for health programmes in the world’s poorest countries. But Paris auditors have said it unfairly penalises Air France. EurActiv France reports.
“Every time Air France is in trouble, there are renewed attacks on the Solidarity Tax,” said Bruno Rivalan from the NGO Global Health Advocates.
Just days before the presentation of Air France KLM’s new strategy, the French Court of Auditors backed the airline by criticising the Solidarity Tax on air travel, which it says distorts competition.
“It is clear that this solidarity mechanism, which has no link to the air travel sector, has lost its ideals, that the French example has not been followed, penalising French air traffic. Now is the time to reconsider its objectives and its relevance,” the report said.
The Chirac tax
Established in 2006 by then president Jacques Chirac, the Solidarity Tax adds between €1 and €46 to the price of flights from France. The revenue it generates is almost entirely devoted to health programmes in developing countries, like the Global Fund to Fight AIDS, Tuberculosis and Malaria, or UNITAID.
Oxfam has taken aim at the increasing use of ‘blending’ private sector investment with foreign aid, in a wide-ranging report looking at the future of the Sustainable Development Goals (SDG)s.
Following France’s example, eight other countries introduced a tax on air tickets (Cameroon, Chile, the Republic of Congo, Madagascar, Mali, Mauritius, Niger and Korea). The question was even floated at European level in 2005, before falling out of fashion.
The narrow base of the tax is one of the main points of criticism from the report. “While around 30 countries were supposed to contribute to this fund, only nine participate today with a tax on air tickets. They vary greatly in level and scope, and they have significantly less air traffic than France. No other European country participates,” the auditors said.
Just nine countries
“France gave up pushing the subject politically several years ago,” said Rivalan. “But Chile and Korea have joined the list of countries, and in Japan, where air traffic is very dense, the question of implementing the tax is very advanced.”
For Air France, the biggest single contributor to the tax on air travel, the cost is hard to bear. Out of a total of €210 million raised for health programmes each year, it contributes around €70 million.
This is another of the report’s major criticisms. As the tax’s contribution to health programmes in developing countries is limited to €210 million each year, any extra revenue is tacked on to the state budget. In 2014, this was €5 million, and in 2015 it was €9 million.
But in its report, the Court of Auditors called for an end to this over-collection, with the level of the Solidarity Tax adjusted to what is “necessary to finance the development solidarity fund”.
On 1st July 2006, France and Gabon became the first countries to introduce a tax on airplane tickets to finance development aid for poor countries.
Following the publication of the report, Air France’s CEO, Frédéric Gagey, launched another attack on the Solidarity Tax. Speaking at the French Senate, Gagey said that the tax should be levied on international train services like Thalys or Eurostar, to compensate for distortions to competition that airlines face on these journeys.
A 2014 report on the competitiveness of air transport had already attacked the Solidarity Tax and recommended that air travel be removed from its tax base.
But none of the tax’s critics suggest a way to compensate for the loss in revenue this would cause for developing countries. Over five years of cuts to France’s aid budget, the tax on air travel has had to take up the slack on a number of programmes, even reaching beyond its healthcare mandate.
Part of its revenue is now allocated to the Green Climate Fund.
French Court of Auditors