An Aviation Tax Tsunami on Malta’s Horizon – Alfred Quintano

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Local media have been inundated with comments and statements from representatives of tourism stakeholders on proposed EU rules to introduce a new aviation fuel tax regime.

As is often the case, however, we have not heard a single comment on the matter from the official sources directly involved.

One wonders about the objective and the official position of the European Parliament and the European Commission on the issue since, as usual, their respective representative offices in Malta are like deaf-mutes despite the high salaries.

It is particularly when aviation issues come to the fore that one realizes that, despite all the loud claims about the central role of the aviation industry in Malta’s socio-economic well-being , Malta remains perhaps the only country in the world without a Civil Aviation Authority that would regulate the industry and bring together all facets of Maltese aviation under one roof. In recent years, under the two administrations, Malta has seen the establishment of hundreds of large and small authorities or agencies but still has no civil aviation authority. My crusade on this issue has repeatedly fallen on deaf ears.

I share all concerns expressed by stakeholder representatives that new EU rules to introduce a tax on aviation fuel will lead to a disproportionate increase in the cost of operating flights between Malta and the EU, whose destinations are the backbone of our tourist flows.

This especially as we are seeing a clear post-COVID development in which Italy has become our biggest source market for tourism, ahead of post-Brexit Britain.

The longer the flight distance, the higher the fuel consumption and the more difficult it is for Malta to penetrate lucrative Nordic winter sun markets such as Sweden, Finland and Norway. A flat tax would be competitively neutral as it would have an equal impact on all tourist destinations in the EU. A percentage tax system would be to our disadvantage.

It has been demonstrated that Malta did not take a strong enough stance against the imposition of an EU-wide tax on aviation fuel at an early stage. This may be factually correct.

Stakeholder representatives, such as MHRA Chairman Tony Zahra, stressed that the hospitality sector is aware of the climate challenge and strongly believes in climate action, both in terms of mitigation and adaptation. Efforts by the hospitality sector to invest heavily in energy reduction programs and measures to reduce the carbon footprint are to be commended.

On the other hand, what have we done as a nation, especially as an aviation-dependent island, to reduce greenhouse gas (GHG) emissions? Hand in hand, can we argue with Brussels that a waiver of a possible aviation fuel tax for Malta is justified?

Aviation is a primary polluter, accounting for around 3.5% of global pollution. Over the past 15-20 years, the global aviation industry has achieved massive emission reductions of 25-30% per flight with aircraft engines that burn less fuel. And yet, the percentage share of global pollution produced by aviation is increasing rather than decreasing.

The paradox is simply that, ignoring a two-year glitch due to the pandemic, the number of passengers and the flights operated continue to increase at a rate of eight to nine percent per year.

What have we done, as an island dependent on aviation, to reduce greenhouse gas emissions?-Alfred Quintano

The global aviation industry, under the direction of two gigantic bodies ‒ ICAO (a United Nations agency) and IATA (a global airline lobby group) ‒ prides itself on being largely self-regulated.

Where industry self-regulation is deemed insufficient, particularly at the local level such as in Malta, supranational bodies such as the EU find fertile ground. In its Fit-for-55 process, the EU recognizes that the fastest route to reducing aviation fuel emissions is through the extensive use of Sustainable Aviation Fuel, or SAF, a very similar non-fossil jet fuel. on traditional fuel.

Longer-term solutions actively sought by the aviation industry are hybrid electric aircraft and the use of hydrogen engines. SAF is the obvious fast step forward were it not for two critical issues: a limited supply and its price being three times that of fossil fuel for aviation.

Nevertheless, the EU has already required that, to reduce aviation emissions by 55% by 2030, a blend of SAF with fossil fuels by 2% by 2025, increasing in stages to 63% here 2050, is the obligatory step. forward.

SAF is already available, albeit in limited stocks, at all major European airports, Malta being a glaring exception. Aircraft departing from Malta cannot use the SAF simply because it is not available.

In addition, the monopolistic position of aviation fuel supply at our one and only airport results in some of the highest fuel prices in Europe and also when compared to our competing tourist destinations.

The global industry is also committed to reducing GHG emissions produced by airport terminals and ground handling equipment through electrification.

It has been claimed that the imposition of an aviation fuel tax by the EU is “another tourism storm brewing on Malta’s horizon”. But there is a far worse tsunami that could be on Malta’s horizon.

Nothing was said about the fact that, so far, international air travel within the EU is VAT zero-rated, while domestic air travel is subject to VAT at the prevailing VAT rate in the country. . For example, the current VAT rate in Italy is 22%. It is therefore not surprising that a one-hour flight from Rome to Milan is more expensive than a two-hour flight from Malta to Milan.

We agree that the aviation industry is essential for the socio-economic development of Malta and that it must be given the attention it deserves. It’s not for the faint-hearted and that’s why when the going gets tough it’s hard to gather all your strength and get going.

Alfred Quintano is an aviation and tourism consultant and teaches aviation operations at MCAST.

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