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Flying Tax Could Ground Travellers

Author: Walter Robinson 2002/01/17
Paul Martin's flying tax - introduced in the December 2001 budget - is sure to clip the wings of Canadian travellers by adding over $100 to the price tag of your family's next vacation. Slated for April 1st (add your own April fool's joke here), an extra $24 will be added to a round trip ticket anywhere in Canada. The 'Airline Travelers Security Charge' (ATSC) as official Ottawa has dubbed it, is supposed to pay for $2.2 billion in security improvements over the next five years.

But the federal government has been unclear as to how this $2.2 billion will be spent. Why these costs were not covered through reallocation from lower priority areas (eg: corporate welfare), existing security spending or $230-million in 'lease-payments' that airport authorities pay to the feds remains a mystery.

The new flying tax will add, on average, an additional $440 million in revenues each year to the government's bottom line. All flying taxes will land in the consolidated general revenue fund. The security improvements at airports are supposed to be funded over five years yet the enabling legislation in does not contain any sunset clause.

Taxpayers have flown with this movie before. Just 14 years after Orville and Wilbur Wright made history at Kittyhawk, NC, Sir Thomas Whyte told Canadians in 1917 that income tax would be "temporary measure" to finance the war effort. So the question becomes: Is the flying tax temporary If income tax is any indication, the answer is probably NO.

The CTF opposes this new tax on two grounds. First, Canadians are already paying hefty taxes and ancillary charges each time they fly. Second, fundamental policy questions have not been addressed.
To start, we shell out as much as $12 to the airport authority in Airport Improvement Fees (AIF). Then NavCanada - the not-for-profit (sic) air navigation authority - takes its cut, raking in $820 million in fees, half coming from airline passengers.

Then many airlines have a $6 insurance surcharge and Air Canada is collecting its own additional high fuel price surcharge of $15. And true to form, Ottawa gets in on the action at the end applying GST to the taxes as well as the ticket price. What does it mean to you Well let's consider a quick hop between Edmonton and Calgary on a cheap $100.00 flight.

Ticket Cost: $100

Taxes:
AIF: $22.00
NavCanada: 20.00
Insurance: 6.00
GST: 10.36
ATSC: 24.00

Total: $182.36


That's an 82% tax rate. This flying tax also raises fundamental policy questions that should be addressed.

Where does the government draw the line between public safety and private benefit in arriving at this user fee structure If terrorism is directed against the state, why doesn't the state play a greater role in its anti-terrorism response Why should flyers bear all the costs

How will this charge improve airline competition encourage growth in domestic and international traffic Twenty-four dollars on a round-trip full fare across the continent is relatively minimal in one's purchase decision, however, adding $24 to a discount carrier's short-haul fee is exorbitant. Why does Canada need to create an entire new bureaucracy to manage the security issue

Why not just set stricter security regulations and standards for airport authorities and airlines and allow market flexibility and innovation to determine the fees to be paid

What accountability and reporting mechanisms will be in place to ensure that all monies raised go directly to aviation security measures Finally, what assurances do Canadians have that this tax will not become a permanent revenue source for government

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Franco Terrazzano
Federal Director at
Canadian Taxpayers
Federation

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