13 January 2011

A Green Paper published by the European Commission in December 2010 recommends that VAT be levied on all air and sea transport – a move that could see the cost of air fares increase by up to 20%. Currently all air and sea travel within the EU is exempt from VAT.

 The paper –’On the future of VAT: Towards a simpler, more robust and efficient VAT system’ – claims that putting an end to the exemptions applicable to international passenger transport by air or sea would ensure a level playing field. The report also suggests that the proposals could reduce carbon dioxide emissions in the fight against climate change.

 The European Commission is currently considering this paper and its proposals.