It may sound surprising, but aviation still carries very low tax burdens for its polluting activities, especially when contrasted with other transport sectors such as private cars. This mismatch has drawn frequent criticism and is seen as a missed opportunity in the fight against climate change because it deprives governments of revenue that could fund greener transport and energy solutions.
New analysis indicates that European governments collectively lost about €34.2 billion in revenue last year due to the aviation sector’s light taxation. That amount, equivalent to roughly €4 million every hour, could fund large-scale infrastructure projects like high-speed rail spanning around 1,400 kilometers, a transport option that tends to produce far lower emissions than aviation.
The aviation industry generally does not pay kerosene tax and faces minimal ticket taxes or value-added tax, with carbon charges primarily applying to intra-European flights. The study examines how much revenue air travel would generate if these exemptions were removed and compares it with current year earnings to reveal the potential fiscal gap.
– TEA –
Spain is highlighted as one of the nations losing substantial revenue due to these tax gaps. If aviation were taxed comprehensively, the United Kingdom and France would collect an additional €5.5 billion and €4.7 billion, respectively, reflecting the scale of aviation activity in those economies. The pattern shows that the largest deficits align with the size of each country’s aviation sector. While some nations tax banknotes, those revenues are relatively small compared with aviation taxes that could be raised.
Air France and Lufthansa are cited as prominent examples illustrating how revenue losses scale with big airline operations. Across Europe, estimated revenue shortfalls from aviation-related activities run into several billions of euros.
Illustrations accompanying the report note that there is a distinction between taxes on passengers and taxes on airlines. Taxes charged to passengers include ticket taxes and VAT, while fuel taxes and carbon pricing are borne by the airlines themselves. The study notes a €34.2 billion deficit and highlights that shippers paid €20.5 billion in fuel taxes and carbon prices.
“Airlines are approaching record profits this year while polluting fuels continue to be used,” a TEA aviation director remarks. The assessment argues that Europe loses income by not taxing the aviation sector more robustly. Given the profit momentum among some carriers, governments face questions about balancing national airline interests with public environmental responsibilities. The report asks whether road users face greater fuel taxes than major European carriers, pointing to a broader policy gap.
Without preventive steps, the tax gap could rise substantially as the sector expands. Projections indicate traffic may recover to near pre-pandemic levels in the coming years, and by mid-decade the tax gap could reach tens of billions of euros. The organization urges policymakers to close the gap, suggesting a mix of measures: imposing a kerosene fuel tax, applying a 20% VAT on tickets, and expanding the aviation carbon market to cover all outbound flights. If these changes are not implemented, it recommends setting a tax equal to the gap in each country until the reforms take effect.
Impact on passenger fares would be a natural consequence of higher taxes. The report argues that higher levies could reduce demand while delivering CO2-emission savings. It concludes that removing exemptions in 2022 would save tens of megatons of CO2, though non-CO2 climate impacts would still be relevant if full accounting is considered.
There is a call for reinvestment of aviation tax revenue into green propulsion technologies and sustainable aviation research. The conclusion emphasizes that taxes should function as a fair mechanism to fund clean energy transitions rather than as penalties. In this view, a properly taxed aviation sector would support citizens and industry over the long term, helping the industry transition to lower-emission operations without compromising essential connectivity. The report closes with a call to end cheap flights at the pace emissions require.
Reference material remains accessible in the study published by the transportation and environmental policy group. The document outlines data, methodology, and scenarios used to assess the potential revenue impacts of different tax regimes on aviation. It is intended to inform public debate and policy design about sustainable transport funding and climate action in Europe.
Notes: The study details the separation of passenger-related taxes from airline-related charges and presents various tax scenarios and their fiscal and environmental implications. It also discusses broader implications for transport funding and climate policy within the European Union and its member states.