DEVELOPMENT: EU Debate Adds Fuel to Aid

By IPS Correspondents Reprint | | Print |

Stefania Bianchi

BRUSSELS, Feb 16 2005 (IPS) - French and German proposals to tax airline fuel for development funding may face tough opposition at a meeting of European Union ministers later this week.

European Union (EU) finance ministers meeting Thursday will consider a tax on kerosene fuel used by commercial aircraft to raise funds for aid to poor, mostly African countries. Europe’s big four countries – Germany, Britain, France and Italy – agreed on the concept at a G7 (the seven leading industrialised countries, the United States, Canada, Britain, France, Germany, Italy and Japan) finance ministers meeting in London Feb. 5.

The initiative seeks to support an immunisation drive as well as anti-AIDS measures in Africa.

French finance minister Herve Gaymard and his German counterpart Hans Eichel firmly backed the proposals. The European Commission, the EU executive, endorsed the proposals Wednesday (Feb. 15), but stressed that the tax should not become a substitute for normal aid programmes. It reiterated calls for rich countries to give at least 0.7 percent of their gross national income (GNI) in foreign aid.

That target is part of the United Nations Millennium Development Goals (MDGs), which include a 50 percent reduction in poverty and hunger, universal primary education, reduction of child mortality by two-thirds, cutbacks in maternal mortality by three-quarters, promotion of gender equality, and reversal of the spread of HIV/AIDS, malaria and other diseases. The target date for many of the specific goals is 2015.

"The Commission has said it is in favour of such a tax or any other source of finance for development on a number of conditions," spokeswoman Francoise Le Bail told media representatives. Among those conditions are that revenues raised must be in addition to a country’s regular aid budget, and that the money be ring-fenced for development, she said.

"Given the urgent priority of mobilising substantial increases in development finance for the world’s poorest countries, innovative proposals like the airline tax are to be welcomed. Nevertheless, this tax should in no way substitute for donor countries adopting binding timetables to reach 0.7 per cent of GNI," Marta Arias Robles from Oxfam’s campaign and policy department told IPS.

"It isn’t an alternative to the needed changes in international trade rules or the cancellation of poorest countries’ external debt. The countries backing the proposal would also need to provide additional details on the procedure for the use of the resources raised," she added.

Alex Wilks from the Brussels-based European Network on Debt and Development added that the proposals are "important to consider as a complement to traditional aid."

Tax issues require agreement by all 25 EU member states. Some governments have already expressed concern about the impact that aviation fuel tax could have on Europe’s airlines in the absence of a coordinated international fuel tax. Ireland and Spain are among countries that oppose such taxation, and could block the proposals.

The airline industry has also reacted strongly against the proposed fuel levy. Airlines are worried that a tax could hit them at a time of cut-throat competition.

The Association of European Airlines (AEA), which represents Europe’s major carriers, says the proposals could cripple the industry. "Of course we applaud humanitarian initiatives, but why target the airlines? Our industry is in the midst of a fundamental crisis," said Ulrich Schulte-Strathaus, secretary-general of the AEA.

"Our members are laying off staff and trimming their product to be able to offer the sort of low cost, low fare product the customers want, only to be once again confronted with a measure designed to increase our costs. We keep telling national governments in Europe that the airline sector is not an endless source of taxable revenue," he said.

Schulte-Strathaus pointed out that airlines performed an essential task in facilitating trade and tourism in the disadvantaged regions of the world. "If the ministers were sincere about helping developing countries, they would be asking themselves how they could encourage, and not discourage, travel and tourism into these regions," he added.