Sterling Heights, Mich., June 17, 2015– Air passenger taxes in the USA are amongst the highest in the world, according to a new study by UHY, the international accountancy network.
USA imposes a levy of $23 on short haul flights and $28 on long haul flights leaving the country representing Transportation Taxes, Segment Taxes and 9/11 Security Fees. This results in the highest tax of any G7 economy.
UHY says that around the world, the most expensive taxes are for long haul flights departing from a Russian airport, where unlike many other countries, airline tickets are subject to sales taxes.
UHY explains that these additional costs damage tourism, penalize business enterprises trying to expand overseas, disadvantage remote regional cities, and chip away at labor mobility.
UHY looked at taxes and compulsory government charges imposed per passenger on an economy class flight in 20 countries around the world. It also analyzed additional charges imposed on a per passenger basis by airport operators.
The global average currently sits at $23 on a short haul flight and $53 on a long haul flight, with many nations in the study not charging any air passenger taxes.
UHY notes that although the US travellers see high taxes and other charges listed on flights to European destinations, the bulk of these costs are fuel charges listed by the airlines; as European air passenger taxes are generally lower than in the US, and several countries do not charge them at all.
Within the EU, the UK still has the highest flight taxes: an adult with an economy short haul ticket flying from a UK airport will pay $20 in tax. For a first or business class ticket, the amount of taxes paid would be even higher at $41.
Many smaller European countries do not impose any taxes on individual passengers, including Ireland, Slovakia and Belgium. In many cases, there has been intense lobbying by local airports and business groups to keep taxes on flying to a minimum to prevent travellers from using airports in neighbouring countries with lower taxes.
Comments Rick David, COO of UHY Advisors, a member of UHY: “It may be a surprise to US customers that airline ticket taxes are so high in the US compared to some of our peers.”
“Airlines provide a crucial piece of our transportation infrastructure. They facilitate a great deal of economic activity that is essential for countries that want to benefit from globalization. The higher taxes on flying in the USA hurt airlines, business users and consumers.”
“Countries and cities that are expensive to reach lose out on tourism. High air taxes can also be harmful to businesses, as in many commercial relationships there is simply no substitute for face to face contact.”
“For smaller businesses, the cost of flying to see customers may be a serious consideration in deciding whether not to expand into new markets, especially overseas – it can lock them out of globalization. Taxes in the USA can add as much as 15 percent to the cost of flying, so they can pose a meaningful additional burden on budgets.”
UHY adds that in the BRIC economies, flight taxes are actually higher than the global average, at an average $21 for a short haul flight. Long distances between cities and relatively weak road infrastructure in these countries make the alternatives to flying significantly less attractive, especially for business trips, so flights are a tempting target for taxes.
UHY explains that this approach imposes greater disadvantages on more isolated regional cities because they may become too expensive as a destination or location for a business. It notes that along with the USA, Russia, Canada and Australia – all geographically large countries - have four of the five highest taxes on flying in the study.
Airport and airline charges lack transparency
UHY adds that on top of taxes and compulsory payments imposed by government bodies, additional airport fees levied on individual passengers for a short haul flight amount to a typical $23 around the world.
Although airport fees are usually passed on to the consumer, airlines often complain that the charges amount to an abuse of an airport’s monopoly status if it has a particularly favored geographic location near a major city.
Airlines also add their own charges such as ‘fuel charges’ which many consumer groups argue should simply be included in the cost of the flight.
Adds Rick David: “For consumers, taxes and fees are confusing; they mean the final ticket price is usually a shock. They also add to the headache of working out how much extra a flight booked using air miles will actually cost for these required fees”.
“A major European study five years ago recommended that all air fares should state simply the basic air fare, airport charges and government taxes which are levied per passenger, and the total price. The study said that the costs of operating the flight, such as ticketing or fuel, need to be included in the basic air fare.”
“In the USA and around the world, the issue of complex charges is an area where far greater progress needs to be made to ensure better transparency and competition. Businesses and consumers would greatly benefit if regulators and tax authorities kept aviation taxes low and ensured that charges were more transparent.”
*Russia levies sales taxes on airline tickets – calculations based on actual ticket price, Moscow to Novosibirsk / Moscow to New York.
**based on international flight taken by a non-national – Egyptian nationals pay lower rate on departing international flight.
***Short haul calculation based on US$165 total costs – flight Detroit to Miami.