October 23, 2000
One of the constant themes of my columns has been that the internationalising tendency has not just led us into needless wars or sovereignty limiting trade agreements, but that foreign affairs are now becoming domestic. In Britain imperial measurements like inches, pounds and gallons are now illegal. Why? The European Union told us to make them illegal. Before you ask, parliament has yet to vote on the laws that are already in effect. British farmers are limited to producing 85% of British milk consumption so that French dairy farmers can have a market. In Ireland, an inflationary boom has been met with a very low interest rate because the German economy is weak and the Irish now share a currency with those Germans. To paraphrase the feminists, the international is domestic.
This doesn't just apply to Europe, but to America as well. In addition, it could seriously affect your standard of living. For the European Union want to increase the taxes that Americans pay for their aircraft fuel. The first question is how can the Europeans do this? Well there is an agreement, the 1944 Chicago Convention, which prohibits us from taxing international aviation fuel. If the government so strongly wishes to tax aviation fuel then surely they can negotiate their way out of the convention and then impose it unilaterally. That is not what they want to do, however. They want all the countries of the world to tax it together, and tax it at an enormous rate.
The admission that this is a serious plan by the British government came up in the British House of Lords. The government spokesman said that they would put tax on aircraft fuel, but only after the Americans had agreed to do the same. Here is what he said:
As a point of fact, we are bound by the 1944 Chicago Convention and subsequent protocols that forbid us from taxing aviation fuel. That is the basis on which we have to work until we have persuaded countries internationally to tax aviation fuel.
That's right, in the rather convoluted prose of Lord McIntosh of Haringey they want to "have persuaded countries internationally to tax aviation fuel" rather than impose the tax internationally. That's America. THAT'S YOU.
Just a second, in the middle of an election year don't you think that this would be mentioned? After all the man who makes treaties is the President of the United States. And he could be making taxes, which would be massively unpopular. If you think that the tax on aviation fuel will be a modest one or two percent, think again. In answer to another question on smaller planes, the sort of tax that they are thinking of becomes clear:
any change to relative taxation of av gas, which the noble Lord uses, and the kerosene that jet engines use would be towards higher taxation for jet engine fuel rather than lower taxation for petrol engine aircraft.
That's right, the move will be towards the British rate of petrol tax (although I doubt that it will quite get there). How high is that exactly? Well seventy three percent when I last looked. Think about it. Three hundred percent if you look at it from a pre rather than post tax perspective. That means that the price of fuel would be quadrupled. So every dollar paid for aircraft fuel will then have to be four. Now, as I said, I see little prospect of aircraft fuel tax getting quite that high, but the ceiling isn't exactly low. So what are the candidates positions on this?
Now this is a serious policy. The British Government have admitted that they are pursuing an international campaign to tax fuel. This is what Lord McIntosh, a government minister, said on Thursday:
The Government support on environmental grounds the removal of the international ban on the taxation of aviation fuel. We shall continue to pursue the issue in the forum of the International Civil Aviation Organisation.
Now to some extent that's fine. In a democracy, it should be the governments that decide their own taxation limits. That is not the intention. In the next sentence he says:
The Financial Secretary to the Treasury has made it clear that the Government have no plans to take advantage of the European Commission's proposal to allow member states to opt to tax aviation fuel used on domestic flights and on flights within the EU.
So they will not tax although they want to. What's up with that? Well the answer is tax competition. That healthy state of competition that means that the economies that let their people keep the most money will grow the fastest. It has a wonderfully bracing effect and naturally, the governments that are so keen on competition policy want to form into a cartel on taxes. Here is what McIntosh said:
However, an independent study commissioned by the European Union confirms that taxing aviation fuel only in the EU would have very little environmental effect and would discriminate against British and European carriers.
Rewind and compress, "an independent study ... confirms that taxing aviation fuel only in the EU ... would discriminate against ... European carriers." This leads to two conclusions, firstly Lord McIntosh is not a wordsmith and secondly that they want to tax you. If you are in any doubt here is what he says near the end:
I hope that I have made it clear that there are significant disadvantages in Britain or the European Union going it alone.
This is the situation. Britain (and presumably the EU) wants to impose taxes on aviation fuel. They do not want to impose taxes in Europe alone. This can logically mean only one thing, that they want to impose taxes internationally. Internationally means America. Although it is not stated in this exchange, the British government has said that they want this agreed in the autumn of 2001, well within the next four years. Therefor under the next presidency, they will want to increase significantly the price of airline tickets through this tax. So, who knows about it?
Who will really suffer? Obviously, it will be the flights where fuel is a large part of the budget. As the amount of fuel is fairly constant then it will be those flights that don't have much in the way of stewardess service or free drinks. Low margin flights. Which flights have the lowest margins? Internal flights. Which country has the most people flying internally? The United States. You will see the poor, and to use Al Gore's phrase "working families", being taxed on to Greyhounds. This tax will also tax those businesses that have to move executives around the country quickly, a tax on business and economic efficiency. Surely a tax like this would be roundly condemned or stoutly defended. So what are the candidates saying?
Well a search of the web sites reveals more than intended. Using the simple search "aviation fuel tax" the Bush site comes with the message, "Your search returned no results." Not surprising really, but then the Bush campaign are not always the best at finding a winning issue. I then went to Gore's website. The search (when choosing all rather than any terms) came up with the equally illuminating "Sorry, no matches were found containing aviation fuel tax." So why the mute button? Is this a new idea? Well, no it has been on the table from the UK at least since 1999, and its been touted by the OECD since 1997. Is it going to have a small impact? Quadrupling fuel prices, doubling the price of some budget flights, what do you think?
Of course, you can rely on fighting Al. His book "Earth in the Balance" came up with such classics as the plan to eliminate the motor car in 25 years time (so he has another 17 to go). Is this a man to stand up for the small company sending a negotiating team to a big customer, the working families on holiday, the job seekers? Not Al it seems. This new tax could have a massive effect on the American way of life and it will be done by treaty. At the very least, the presidential candidates could let you know where they stand on this.
For all of those who are too lazy to go over to the debate in the House of Lords and don't believe me, I've reproduced the article for you. Lord McIntosh, is the British government minister :
Lord Berkeley asked Her Majesty's Government:
What action they are taking to encourage all European Union member states to introduce a tax on aircraft fuel so that aircraft pay the same level of charges for fuel as motorists.
Lord McIntosh of Haringey: The Government support on environmental grounds the removal of the international ban on the taxation of aviation fuel. We shall continue to pursue the issue in the forum of the International Civil Aviation Organisation. The Financial Secretary to the Treasury has made it clear that the Government have no plans to take advantage of the European Commission's proposal to allow member states to opt to tax aviation fuel used on domestic flights and on flights within the EU.
Lord Berkeley: My Lords, I am grateful to my noble friend for that full answer. I declare an interest as president of the Aviation Environment Federation. Does my noble friend agree that aviation pollution is a serious environmental problem that causes 3.5 per cent of all global warming? Aviation fuel is currently untaxed throughout Europe. Does he agree that it is odd for the Treasury to turn down the opportunity of a good tax? Will he encourage his European colleagues to take the issue forward as quickly as possible so that the polluter can be made to pay in the air as well as on the ground?
Lord McIntosh of Haringey: My Lords, I certainly agree that aviation fuel is a significant contributor to global warming and I have no reason to doubt my noble friend's figures. However, an independent study commissioned by the European Union confirms that taxing aviation fuel only in the EU would have very little environmental effect and would discriminate against British and European carriers.
Earl Ferrers: My Lords, would the Minister care to speculate on the cause of the charming and noble Lord, Lord Berkeley, having momentarily taken leave of his senses? Taxing air fuel at the same rate as car fuel would be wildly unpopular and would put up the cost of air travel preposterously.
Lord McIntosh of Haringey: My Lords, I do not think that my noble friend Lord Berkeley has taken leave of his senses. He has asked a responsible question that relates to the environmental issues and to equity between countries. As a point of fact, we are bound by the 1944 Chicago Convention and subsequent protocols that forbid us from taxing aviation fuel. That is the basis on which we have to work until we have persuaded countries internationally to tax aviation fuel.
Lord Trefgarne: My Lords, I declare an interest as the owner of a small aeroplane that uses aviation gasoline, which is taxed at the same rate as motor car gasoline. Is the Minister satisfied that that is an appropriate arrangement, or does he hope to offer me some relief?
Lord McIntosh of Haringey: My Lords, any change to relative taxation of avgas, which the noble Lord uses, and the kerosene that jet engines use would be towards higher taxation for jet engine fuel rather than lower taxation for petrol engine aircraft.
Lord Monson: My Lords, does the Minister agree that if the EU alone were to tax aviation fuel, the Swiss in general and Swissair in particular would be in seventh heaven?
Lord McIntosh of Haringey: My Lords, I imagine that the same would be true of Liechtenstein, Monaco and San Marino. I hope that I have made it clear that there are significant disadvantages in Britain or the European Union going it alone.
Baroness Thomas of Walliswood: My Lords, what mechanism might be used to achieve the international agreement on taxing fuel that we require?
Lord McIntosh of Haringey: My Lords, I hoped that I had dealt with that in my first answer. We are making representations through our membership of the International Civil Aviation Organisation towards that end.
Lord Saatchi: My Lords, when he assesses the impact of a possible new fuel tax, does the Minister agree that it would be helpful for us to know the base level of taxation to which any new tax might be added? I thank him for his recent letter in which he attempted to shed light on his reference to "the undoubted fact that the tax burden is falling".--[Official Report, 28/7/00; col. 758.]
However, there is a slight difficulty with his letter, because it makes no reference to the tax burden. When might he let us have a proper answer to the question?
Lord McIntosh of Haringey: My Lords, I was about the congratulate the House on asking supplementary questions that related to the original Question, which was about aviation fuel tax. I am sorry that the noble Lord, Lord Saatchi, has let the House down.
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