EU to tax aviation fuel ?

The European Commission today backed moves to tax aviation fuel to help fund aid to developing nations – a step that would increase air fares.

Commission spokeswoman Francoise Le Bail said the tax, which will be discussed by the finance ministers on Thursday, would help meet the commitment for rich countries to contribute 0.7% of their gross national income to fund development projects in poor countries around the world.

The endorsement comes a month after a report released by the UN’s anti-poverty task force shows how developed nations are not meeting pledges made in 1970 to alleviate poverty, hunger and disease in poor nations by 2015.

“It is important for us that the money collected comes in addition with what the governments are already doing in financing development,” Le Bail said in Brussels.

In addition, any tax on jet fuel must not hurt airlines’ competitiveness, she said.

Denmark, Luxembourg, the Netherlands and Sweden are the only EU countries that currently meet the 0.7% of GNI commitment.

Laszlo Kovacs, the EU commissioner in charge of tax policy, said in Berlin that EU finance ministers will probably give unanimous backing to the tax. But he warned against adopting it only in Europe.

“The question is whether we can come to an agreement with other countries like the United States, Canada and Japan, which have commercial airlines, because if we introduce a tax only on the European scale it can result in a deterioration in competitiveness for the EU countries’ airlines,” he said.

Airline fuel is currently untaxed around the globe, and airlines oppose any tax. The US government also has expressed opposition.

Germany and France have backed the idea. Britain has been more wary, but is reported to be warming to the idea as the government seeks to give a higher priority to helping Africa.