Tax flight – An Investigation into the exemption from taxation of international aviation

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This working paper by Daniël Meijers from the International Centre for Integrative Studies (ICIS, Maastricht University) looks at the origins and development of the exemption from various kinds of taxation of international aviation.


International aviation is excluded from many kinds of taxation. These exemptions originate from the United States’ pre-Second World War-policy to stimulate pioneering aviation companies and from the fact that at that time tax policies were not yet designed to deal with aviation. In the aftermath of the Second World War, following the American example, the international community agreed to partly liberalise the aviation sector. A liberalised aviation sector would benefit from equal tax rates. In 1950 the International Civil Aviation Organisation (ICAO) called upon its member states to set their tax rates to zero. Although not legally binding, the most ICAO members chose to adhere to the ICAO’s call. This resulted in the almost total tax exemption for international aviation that is prevailing today. In 1992 the US introduced the Open Skies agreement, which further liberalised aviation. The deadlock, which prevented the international community from taxing aviation, became less secure when in 2002 the European Court of Justice ruled that Open Skies had to be replaced. In the modern EU, only the European Commission has the authority to negotiate with other countries about treaties, such as Open Skies agreements. Being unbound by historical treaties, the EC has the freedom (and intention) to strive for the introduction of taxation. Given the dominant position of the United States and the EU in global aviation, the upcoming agreement between these two blocks might well be the beginning of the end of the widespread exemptions for international aviation. 

Click here to read the full working paper

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