Indirect Taxes on International Aviation

Jon Strand and Michael Keen

No 2006/124, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the case for internationally coordinated indirect taxes on aviation (as a source of general revenue-not (necessarily) as a source of development finance). The case for such taxes is strong: the tax burden on international aviation is currently limited, yet it contributes significantly to border-crossing environmental damage. A tax on aviation fuel would address the key border-crossing externalities most directly; a ticket tax could raise more revenue; departure taxes face the least legal obstacles. Optimal policy requires deploying both fuel and ticket taxes. A fuel tax of 20 U.S. cents per gallon (10 percent, at today's fuel prices, corresponding to assessed environmental damage), or alternatively ticket taxes of 2.5 percent, would raise about US$10 billion if imposed worldwide, and US$3 billion if applied only in Europe.

Keywords: WP; ticket tax; indirect tax; aviation fuel (search for similar items in EconPapers)
Pages: 58
Date: 2006-05-01
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Citations: View citations in EconPapers (4)

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