Air travel tax under European scrutiny

The European Commission has opened a state aid investigation into an aspect of the air travel tax amid concerns it could constitute state aid. The EU’s anti-trust arm announced yesterday it is investigating whether a clause exempting airlines from paying the tax for transit and transfer of passengers is in breach of EU competition law.

The decision to open an inquiry is a boost to Ryanair which has brought a number of complaints to the European Commission about aspects of the air travel tax introduced by the Government in 2009.

The decision to specifically examine an exemption clause that permits airlines not to pay the tax for transit and transfer of passengers travelling in and out of Irish airports reopens a case from 2011. Then, the European Commission announced it was not formally pursuing a state aid investigation. But Ryanair referred the case to the European Court of Justice in Luxembourg.

Last November, the court said the commission was wrong not to pursue a state aid inquiry. It found the commission should have carried out a formal investigation rather than reach decision at the preliminary investigation stage.

While EU competition cases generally last more than 18 months, a European Commission spokeswoman said there was no specific date by which the investigation needed to be completed.

This is not the first aspect of the air travel tax to be probed by the European Commission following complaints by airlines. The EU’s competition division previously ruled the two-tier air tax system, which levied €2 on airlines for passengers on flights embarking from and landing within 300km of Dublin Airport and €10 for passengers on longer-distance routes, was biased towards certain flights. The ruling led the Government to replace the two tax rates with one single rate of €3 in 2011. The Government dropped the travel tax in 2013.

A spokesman for Ryanair said the company welcomes the European Commission’s announcement and “will co-operate with this investigation”.