Unhappy Landings: The Latest UN-Backed Push for Global Taxes

Introduction

At the September 2000 United Nations (UN) World Summit meeting, the General Assembly passed the UN Millennium Declaration, announcing a comprehensive effort to eradicate third-world poverty. The resolution called on wealthier nations to relieve debt and provide developing nations with more generous grant assistance. It also created the Millennium Development Goals (MDGs), a set of eight objectives that would work toward halving world poverty by 2015.[1] 

The UN has discussed several measures to help finance the MDGs, including a 0.7 percent tax on developed nations' Gross National Income (GNI). Norway, Luxembourg, Denmark, Sweden, and the Netherlands have already responded to the UN's funding plans by successfully making the target 0.7 percent contribution to help fulfill the MDGs.[2] Despite these international efforts, however, fulfilling the MDGs remains nearly impossible without a significant infusion of additional funds.

In January of 2005, France rushed to the rescue by proposing a global airline tax that would generate approximately $248 million annually for disease eradication in the developing world.[3] The tax measure would add a surcharge of between $1.19 to $47.66 to each ticket depending on the seating class and flight distance.[4] France plans to implement the tax on July 1 and has received support from the U.K., Norway, Luxembourg, and nine other nations in its efforts to squeeze more money out of taxpayers' pockets. The taxation scheme is clearly another effort on behalf of Western Europe to build a global welfare-state and pass the burden of a guilty conscience onto taxpayers around the world. 

Limiting Competition in the Travel Industry – One Tax Scheme at a Time

As the airline industry suffers from rising jet fuel prices, an additional tax on tickets would only ensure that consumers would pay even higher prices for their air travel. The European Commission estimates that the tax would decrease demand by 3 percent on intra-European Union (EU) flights and 4 percent on international flights.[5] The decreasing demand for airline tickets will most likely cause travelers to look toward other forms of ground transportation to satisfy their travel needs. Pushing more people in this direction would pose just one more obstacle to airlines seeking a more competitive position.

Ironically, the tax would also place economic burdens on nations like France whose economies rely heavily on tourism. Americans in particular may opt to travel domestically to avoid paying superficially inflated ticket prices overseas. Consequently, many elements of the travel industry, from restaurants to hotels, may experience losses. These adverse effects are not limited to traditional destinations. Developing nations, which have begun to rely on tourism for much of their economic growth, could also take a hit.[6] The airline tax would thus have negative implications for wealthier nations as well as for some of the poorer nations that it promises to support.

Of vital importance in any discussion about future airline tax proposals is the current, extremely heavy burden that companies and passengers already bear. In the United States, for example, passengers on round-trip international flights pay nearly $50 in various fees and charges plus a 7.5 percent excise on the ticket price (passenger facility charges and flight segment taxes only add to the load).[7] On domestic flights, a middle-class air traveler can easily pay a 20 percent effective tax rate on an airline ticket,[8] a higher rate than he or she would pay on a 1040 income tax return. Aviation taxes and charges are also steep in other nations, and have been creeping upward in recent years. For example, between 1998 and 2003, aviation tax revenues in France increased 14 percent, while user charge collections jumped almost twice as high (27 percent).[9]

Certain Problems and Uncertain Benefits

French President Jacques Chirac hopes that the tax's imminent debut will pave the way for a much larger and more expansive program.[10] The EU, for one, has already considered implementing the tax as a means of meeting its own anti-poverty pledge.[11] UN Secretary General Kofi Annan has also expressed support for the tax, noting that it would give the UN a constant supply of funds for its development goals.[12] Although nations are currently implementing the tax voluntarily, if the measure manages to make its way into the UN's hands, several nations may feel more direct pressure to levy it.[13]

Looming deficits and financial instability may preclude nations forced to levy the tax from collecting it in such a way that would actually contribute to the fight against poverty. The tax would especially hurt those financially-troubled nations that rely on revenues from a booming tourism industry. As a result, they may feel tempted to substitute their current level of aid with funds that the airline tax generates. They would then redirect the tax revenues originally devoted toward foreign aid to other domestic projects.[14] The airline tax would fail to generate any additional aid from these nations because they would simply decrease their current level of assistance to offset the tax's effect on their economies.

Even if nations effectively levy the tax, it is unlikely that they would make strides toward fulfilling the MDGs. For instance, some of the goals are so broadly defined that they are almost impossible to measure. One of the aims is to "develop a global partnership for development" and includes such general measures as to "address the special needs of landlocked and small island developing States."[15] It may therefore be difficult to ascertain whether revenues generated from the tax actually accomplish a purpose.

More importantly, however, the airline tax would largely fail to tackle the key reasons why developing nations consume foreign aid. Many third-world nations suffer from corrupt governments, a dearth of civil and political rights, and an absence of free markets. While a global airline tax may temporarily provide essential items such as food and vaccines, it would ultimately fail to address the long term causes of poverty in third-world nations. In fact, the World Bank's Development Reports have consistently shown that free markets, not constant supplies of aid, are the fastest and most reliable means of placing developing nations on the track toward economic growth.[16] To give one example, improving developing nations' open access to agricultural imports may prove more beneficial over time than simply providing them with food shipments.

A Slippery Slope away from State Sovereignty and toward UN Governance

Giving the UN the authority to impose a global airline tax may also send sovereign nations further along the path of supranational governance. It seems unlikely that the UN will limit its taxation powers solely to airlines. Organizations like Stamp out Poverty have already expressed hope that the airline tax will lead to additional international taxes, such as a currency transaction tax, to help channel more funds into anti-poverty efforts.[17] With the entitlement mentality proliferating throughout Europe, the UN may eventually attempt to form its own global welfare-state, thereby placing an even greater burden on taxpayers around the world.

Thankfully, the Bush Administration has condemned recent international taxation schemes, including the 0.7 percent GNI tax, which could cost the U.S. $80 billion annually.[18] American taxpayers therefore do not face the same potential burdens as those in nations more likely to acquiesce to the UN's demands. Recent UN efforts to expand jurisdiction to affairs like Internet regulation, however, provide little hope that it will stop trying to exert more authority over sovereign nations.

Conclusion

With approximately 20 percent of the world's population living on less than $1 per day,[19] third-world poverty is no doubt a serious issue. France and other nations backing the tax most likely reason that wealthier individuals, who tend to be the ones purchasing plane tickets, should shoulder much of the effort to improve this situation. Regardless of the fact that more low-income people are currently buying plane tickets,[20] travelers are simply not part of the problem and therefore should not be considered as part of the solution. In fact, travelers often help developing nations' economies by staying in hotels and purchasing souvenirs whenever they visit.

Ameliorating third-world poverty is clearly more complex than anything an airline tax can accomplish. While additional food and vaccines could deliver a small dose of relief to impoverished individuals, material contributions will only perpetuate developing nations' dependency on foreign aid. Instead, wealthier countries should work with third-world governments to develop democracy, the rule of law, free markets, and a free press – the building blocks of prosperous societies – which could then help citizens produce their own food and vaccines. An airline tax to generate more aid may appease a guilty conscience for now, but it simply will not stop the painful nightmares of sickness and starvation from continuing to haunt the Western world.

Notes


[1] United Nations General Assembly, "United Nations Millennium Declaration," September 18, 2000, http://www.un.org/millennium/declaration/ares552e.pdf.

[2] Guy Sebban, "Airline Tax: A Bad Idea for the Poor," International Herald Tribune, February 28, 2006, http://www.iht.com/bin/print_ipub.php?file=/articles/2006/02/27/opinion/edsebban.php.

[3] Henry J. Kaiser Family Foundation, "Thirteen Countries to Impose Tax on Airline Tickets to Fight HIV/AIDS, TB, Malaria; France, U.K. to Review Implementation on IFF," March 2, 2006, http://www.kaisernetwork.org/Daily_reports/print_report.cfm?DR_ID=35736&dr_cat=1.

[4] Giovanni Bisignani, "Taxes That Won't Fly," The Wall Street Journal, March 1, 2006. See also, Asian Tribune, "Thirteen Countries Will Adopt Air Ticket Tax for Poor," March 3, 2006, http://www.worldhunger.org/articles/06/global/asian_tribune.htm.

[5] Inter Press Service News Agency, "EU Aid Proposals Prepare for Take-Off," September 7, 2005, http://ipsnews.net/news.asp?idnews=30166.

[6] Air Transport Association of America, "Ticket Tax Illustration: Domestic Itinerary," based on policies in effect as of January 1, 2006, http://www.airlines.org/econ/d.aspx?nid=5077.

[7] Air Transport Association of America, "U.S. (or U.S.-Approved) Aviation Excise Taxes and Fees," based on policies in effect as of January 1, 2006, http://www.airlines.org/econ/d.aspx?nid=4919.

[8] Air Transport Association of America, "Ticket Tax Illustration: Domestic Itinerary," based on policies in effect as of January 1, 2006, http://www.airlines.org/econ/d.aspx?nid=5077.

[9] International Air Transport Association, "Aviation Taxes and Charges," IATA Economics Briefing No. 2, November 2005, http://www.iata.org/NR/rdonlyres/8BC719FF-D354-4F61-8997-11173687DAED/0/aviation_taxes_charges.pdf.

[10] Thomas Kilgannon, Freedom Alliance, "Tax Collectors for the Global Welfare State," September 22, 2005, http://www.freedomalliance.org/view_article.php?a_id=620.

[12] Henry J. Kaiser Family Foundation, "Chirac Announces France Will Begin Airline Tax to Provide Funding for HIV/AIDS, TB, Malaria Next Year," September 1, 2005, http://www.thebody.com/kaiser/2005/sep1_05/airline_tax_hiv.html.

[13] Guy Sebban, "Airline Tax: A Bad Idea for the Poor."

[14] International Chamber of Commerce, "The Airline Ticket Tax - A Business Viewpoint."

[15] United Nations, "Millennium Development Goals," http://www.un.org/millenniumgoals/.

[16] International Chamber of Commerce, "The Airline Ticket Tax - A Business Viewpoint."

[17] Thomas Kilgannon, "Tax Collectors for the Global Welfare State."

[18] Ibid.

[19] The World Bank, "Eradicate Extreme Poverty and Hunger," http://ddp-ext.worldbank.org/ext/GMIS/gdmis.do?siteId=2&goalId=5&menuId=LNAV01GOAL1.

[20] International Chamber of Commerce, "The Airline Ticket Tax- A Business Viewpoint."