Aid tax on kerosene gets a cool response from charities

By Anna McLauclin

Date: 17/02/05

Aid organisations have given a lukewarm response to the idea of raising revenue for developing countries via a tax on kerosene or airline tickets. EU finance ministers will raise the issue, which was touted at the Group of Seven (G7) meeting in London, at today's (17 February) Ecofin Council.

A campaigns officer for development charity War on Want called it a case of 'fiddling while Rome burns'. "While the leaders of the world's richest countries clamber over one another to invent ever more innovative ways of raising development finance, 30,000 children die each day from extreme poverty," he said. "These initiatives are fast becoming a distraction from the real issue of honouring the 0.7% [of gross national income] promise European countries made to the world's poorest countries 35 years ago."

A spokeswoman for international agency Action Aid agreed. "We don't know how much political appetite there is for this scheme or how long it would take to achieve. We would rather governments concentrated on allocating resources from their national budgets to reach the 0.7% goal," she said.

In 1970, the world's richest nations committed themselves to giving 0.7% of their gross national income in overseas aid. So far only five countries - Denmark, Norway, Netherlands, Luxembourg and Sweden - are meeting the target.

Finance ministers will today consider possibilities for raising additional funds through the air transport sector, with Germany expected to put a proposal on the table for a tax for airlines of €300 per tonne of fuel. Similar proposals were aired in both the World Economic Forum in Davos in January and at the G7 meeting last week.

French President Jacques Chirac called for a levy on airline tickets and UK Finance Minister Gordon Brown suggested issuing bonds that would be paid for through aid budgets.

European commissioners for the environment, transport and tax have expressed concern that a tax would harm the EU airlines' competitiveness. A fuel tax would need unanimous backing to become law. According to press reports, Ireland at least would not support it, although an Irish spokesman said that there was no fixed position.

Europe's airlines this week criticised the plan, claiming the sector was already hit by high fuel costs and increasing demand for low-cost travel.

The International Air Carrier Association, which represents Europe's leisure airlines, called the move "fundamentally unacceptable". Director-general Sylviane Lust said: "The airline industry is not taxed, but is the only mode of transport that fully finances the infrastructure used on the ground and in the air. This taxation initiative would further jeopardise the competitiveness of EU carriers."

A spokesman from the European Airlines Association said taxes on airline tickets would be impossible to monitor. "It is a policy that has been made on the hoof and it's not clear how it could work," he said.

But environmentalists say a tax would have the added advantage of bringing down the emissions of harmful greenhouse gases. Some suggest that charging airlines for the emissions they release would make more sense.

Article reports on the ideas discussed at the G7 meeting and the Ecofin Council, both in February 2005, of raising revenue for developing countries via a tax on kerosene or airline tickets.