FLUG REVUE July 2005: Ticket tax for development aid is bad deal

July 2005

AIR TRANSPORT MAY BE FORCED TO FINANCE DEVELOPMENT AID

By Volker K. Thomalla

Holes in state budgets are like swarms of locusts: they lurk hidden in the depths of budget planning and no one knows exactly where they are slumbering or when they will appear. Then, at a signal, they force their way up to the daylight. First of all only a few minor gaps can be detected, but gradually they become bigger and more numerous, eventually forcing those responsible to take drastic measures to remain on top of the situation.

Such a radical measure was discussed by the EU finance ministers at an informal meeting in Luxembourg at the end of May. As the planned increases in development aid for third-world countries can no longer be met from national budgets, a few finance ministers have decided to levy a special tax on air tickets.

Some EU countries turned down the proposal, but the German government wants to pursue the idea and, if necessary, implement it without EU-wide agreement on the point. It looks as if the Germans may be out on their own.

The president of the Federation of German Industry, Jürgen Thumann, suspects that the background to the introduction of the development tax on tickets may be that the federal government is taking this line as a way of getting a permanent seat in the UN Security Council. He warned against considering a European or even national German insular solution. “The German air transport industry is in international competition. There is a tough price war going on and companies are having to do their costings with wafer-thin profit margins.” The goal of increasing development aid may be admirable. But the struggle against world poverty should not be on the back of arbitrarily singling out this industry, Thumann argued. Development aid was something that required concerted action.

The suggestion reminds one a little of the introduction of the tax on champagne before the First World War as a way of paying for the build-up of the German Navy fleet. The fleet has been resting on the bottom of the North and Baltic seas for decades, but the champagne tax is still with us today. If 100 years ago one was supposed to drink champagne for the fleet, are we today to be expected to fly for development aid? It just does not make sense.

This is also the view of the German Transport Forum. The chairman of its presidium, Wilhelm Bonse-Geuking, warned against the negative consequences of continually imposing new burdens on Germany as an aerospace centre, as the country has to defend its position as the biggest exporter in the world and hence should be promoting air transport rather than burdening it further.

For an export-oriented state like Germany, air transport is essential, and the unilateral introduction of this tax would distort the competition in Europe. In my opinion, the protection of jobs, some of which have been created by air transport, is more important than a permanent seat for Germany in the UN Security Council.

From FLUG REVUE 7/2005

Last updated 10 June 2005

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