Government pursues three airlines for €19m travel tax

The Government is pursuing three airlines for a total of €19 million in travel tax in a move that looks destined to end in a number of High Court cases.

Minister for Finance Michael Noonan announced in the budget that the Government plans to drop the controversial €3 per passenger charge from next April. Ryanair responded by announcing expansions at three Irish airports that could bring in a million extra passengers next year, while regional carrier Aer Arann said it would add at least 10,000 and is understood to be planning further increases.

However, the Government is still pursuing both those companies and Aer Lingus in the courts for €19 million in travel tax it says it is due as a result following a European Court of Justice (ECJ) ruling last year.

The ruling is a result of a challenge that Ryanair brought against the tax following its introduction in March 2009. There were originally two rates, a €2 charge for routes to destinations within 300 kilometres of Dublin and €10 for routes further afield.

Local flights favoured
Ryanair successfully argued that this was an illegal state aid, as the lower charge favoured flights within the Republic and discriminated against virtually all other routes.

After the ECJ upheld Ryanair’s claim, it ordered that the Government had to collect the difference between the €2 charge and €10 from all the airlines that benefitted. However, the airlines believe they do not have to pay this.

As a result, Mr Noonan began legal action against all three earlier this year. The Government is understood to be seeking €12 million from Ryanair, and is demanding €4 million from Aer Arann and €3 million from Aer Lingus.

Counter-suit
All three are opposing the Government case and Aer Lingus has launched a counter-suit of its own, in which it is demanding a payment of €60 million from the State.

The airline argues that the €2 charge rather than the €10 should have been the appropriate rate, and is thus claiming a refund of the difference between the two that it paid on longer routes.

Aer Lingus will also tell the court that it originally advised the Government against imposing the levy on the grounds that it was contrary to EU law provisions on freedom of movement, but this was ignored.

Around €3 million of the €4 million total due from Aer Arann dates from before the examinership in which it was rescued by British logistics group Stobart and a number of investment funds. That company does not believe that it is liable for any debts that pre-date this.

While the tax was charged to passengers and passed back to Government, the way in which it was introduced in 2009 meant the airlines paid a portion of it themselves without levying it on their customers.