The group cited the EU’s taxation directive as an opportunity to change tax regimes. Credit: Red Baron/Shutterstock.

A study by the Transport & Environment European campaign group has identified what it called a “tax gap” worth €34.2bn ($38.4bn) in the Europe-wide aviation sector. 

The group defines this gap as “revenues that should have been raised from air travel pricing if the sector did not benefit from [tax] exemptions.” Transport & Environment said kerosene tax exemptions and low ticket taxes created the apparent shortfall. 

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In its report, the group claimed the “missing” funds could pay for 1,400km of high-speed rail infrastructure across the continent. 

Carbon pricing and fuel taxes both come under fire in the paper, despite regulations in place across Europe to allow the practices to push consumers away from fossil fuels. It noted the EU’s Energy Taxation Directive, for which an update was proposed as part of the Fit for 55 strategy but Transport & Environment remarked on “numerous legislative hurdles” stopping the updated legislation from passing through Brussels. 

“The study recommends applying a fuel tax on kerosene, a 20% VAT rate on tickets and extending the carbon market for aviation to all departing flights,” Transport & Environment said. 

The group calculated that increased taxes on aviation in 2022 would have cut out 35Mt of CO₂ and suggested monies raised could be reinvested into SAF projects. 

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Transport & Environment aviation director Jo Dardenne said: “Taxation should not be perceived as a punishment but as a way to fairly charge those who benefit most from aviation’s under-regulation. Those better off in society have been paying far too little for their flying habits.

“Taxation will not limit aviation’s capacity to invest. On the contrary, taxing aviation will benefit citizens and the sector in the long run, as governments step in to finance the transition to clean energy, including for aviation.”