Aer Lingus steps up legal battle with Government over travel tax

Aer Lingus is fighting Government attempts to hit it with an estimated €4 million bill over the now-defunct two-tiered travel tax system introduced by the late Brian Lenihan as minister for finance.

The airline wants the High Court to declare the State should not be allowed to try and recoup the cash from it. It lodged a suit this month against the Department of Finance and Revenue, in retaliation to a case lodged by the State against the it and other airlines in April.

As the State’s finances plunged in early 2009, Mr Lenihan introduced a charge for each passenger flying from Irish airports – €2 if the journey was less than 300km, and €10 if more. Passengers on all domestic flights and a handful of routes from Dublin to eastern Britain paid the lower rate, while others paid the higher rate.

Following a complaint, the European Commission declared the lower rate constituted illegal state aid for domestic flights. The system was replaced with a flat €3 tax for all flights in 2011.

The commission told the Government to recoup the difference – €8 for every passenger who had paid the lower rate – from the airlines. In April, the State filed lawsuits against Ryanair, Aer Lingus and Aer Arann. This is listed for mention on Monday.

Aer Lingus has hired Arthur Cox to try and stymie the Government's case with a separate High Court action.

Ryanair said last night: “Ryanair launched a case last summer seeking repayment of the entirety of tax paid under this scheme (€87 million). Proceedings are ongoing.”

Aer Lingus declined to comment, as “the matter is subject to legal process”. The department did not either, while Revenue said it could not comment on individual cases.