Dr Charles Tannock

Member of the European Parliament for London

Taxation of Aircraft Fuel

Delivered in Plenary 13th December 2000

Madam President

I find the idea of unilaterally setting EU aircraft fuel tax regimes - as laid out in the Garcia Margallo report - entirely inappropriate given that globally we are still subject to the Chicago Convention of 1944 whereby fuel for these purposes is exempt from taxation. Such a move would penalise European aircraft carriers, putting them at a disadvantage compared to carriers from third countries. While the expansion of air traffic and the environmental problems it raises are issues which we should, as a parliament, be addressing, I feel that a more effective approach would be to tackle this within a global framework: to renegotiate the Chicago Convention and thus secure multilateral agreements. By focussing our attention too narrowly on only the activities which take place within the EU, we risk harming our industry without achieving much needed progress in lowering emissions.

This same problem of trying to work a regional solution to a global question arises with the difficult issue of VAT on electronic services. To impose VAT on 3rd country suppliers is not only impractical (in the case of newspapaers and books it gives rise to inconsistencies between the same product in on- and off-line states); it also is inherently neither enforceable nor collectable unless executed on a global scale. One of the attractive features of the new electronic medium is its ability to transcend national borders; it has no more respect for regional ones.

The scheme as it stands will be harmful to the development of SMEs both within and outside the Union - especially in view of the proposed reduction of the exemption threshold to a prohibitively low 40,000 annual turnover. Finally, the 3rd report under discussion on a minimum standard rate for VAT represents Tax harmonisation by the back door. As a British Conservative I can only regret the high excise rates throughout Europe and hope that by promoting Tax competition we may bring pressure on our Labour Government to lower certain taxes in the UK.