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This air travel tax shouldn't fly

Author: Walter Robinson 2002/04/15
Earlier this week, the federal Liberal government shutdown debate for the 75th time since taking power in 1993. This time it was to ram through the new Air Travellers Security Charge (ATSC), more commonly referred to as the ‘flying tax'. Now en route to the Senate for an easy rubber-stamping, the flying tax will take effect on April 1st.

At best, this is a cruel April Fool's Day joke. At worst, it represents flawed public policy in the extreme. A one-way ticket for travel within Canada will increase by $12 while the price of a round trip fare will jump by $24. A flight to the United States will cost you $12 more; international jaunts, an extra $24 upon departure.

Announced last December, the flying tax was part of the government's post-September 11 security agenda. The budget indicated the flying tax would raise $2.2 billion over five years, with an equivalent amount earmarked for security expenditures to be directed by a new federal agency, the Canadian Air Transportation Security Authority (CATSA).

We now learn that only $1 billion in new equipment acquisitions have been budgeted. Furthermore, the $2.2 billion revenue estimate was based on flat line passenger-volume projections. With Air Canada recently reporting a rebound in traffic, overall industry volumes will surely climb. This has led some to predict a tax haul closer to $3 billion.

This is a federal cash grab by Paul Martin, the Minister of Taxes (Finance). It also perpetuates flawed federal aviation policy -- so blame for this tax measure must be equally shared with Mr. Martin's cabinet colleague, David Collenette, the Undertaker (Minister) of Transport, who has already presided over the death of eight airlines (Greyhound, VistaJet, Royal, Roots, Canadian Airlines, Quebecair, InterCanadien, and Canada 3000).

This tax yields several troubling questions.

Why do we have to pay a tax for bomb detection equipment that is on backorder worldwide and for the CATSA bureaucracy, which by the government's own admission will not be in place until the fall? Why does the government insist on appointing CATSA officials through the governor-in-council process (read: patronage) as opposed to hiring qualified officials in a transparent manner?

And why does Canada need a new federal authority to manage the security issue at all? Why not just set stricter security regulations and standards for airport authorities and airlines and allow market flexibility and market discipline (read: big ticket fines for those who fail to comply) in order to determine the funding structure to meet these requirements?

With respect to the tax itself, why were no impact assessments for this tax? Why is Ottawa violating Treasury Board guidelines that mandate the completion of impact assessments and a reflective value of services for the fee to be charged?

And how will this charge improve competition and encourage growth in Canada's airline industry? True, $24 on a round-trip fare across the continent is relatively minimal; adding $24 to a discount carrier's short-haul fee is exorbitant.

Why wasn't the fee set per flight segment travelled (the U.S. model)? Or as a percentage of price of the ticket or distance travelled? Why wasn't a phase-in period considered? And why weren't passengers flying from and to small and remote airports, with no security and detection equipment, granted and exemption?

Why did the government dominated Finance Committee, during its hearings (a few days and just a handful witnesses) reject all these options?

The Canadian Taxpayers Federation in principle supports user fees. However, on a more philosophical plane (pardon the pun), one has to ask where Ottawa draws the line between public safety and private benefit in arriving at this user-fee structure?

In the last Budget, costs for border crossing improvements and fast-tracking passengers through customs and airports were absorbed by taxpayers. Why will public security costs at airports be borne solely by travellers?

On Sept.11, terrorism was directed against the state. Surelty the state should play a greater role in its antiterrorism response. About 2,800 people lost their lives on the ground that day -- 265 perished on the hijacked flights. The point here is not to count the fatalities but to suggest that 10 times as many people perished who weren't flying, as those who were.

What governance mechanisms will be in place to ensure that all monies raised go directly to aviation security measures? As presently constituted, all flying taxes will flow directly into the consolidated revenue fund. (On a rhetorical note, does this sound like EI slush fund accounting to you?)

On these questions, the silence from Ministers Martin and Collenette speaks volumes. Travellers, industry stakeholders, and the opposition parties all agree that the flying tax should be grounded.

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Franco Terrazzano
Federal Director at
Canadian Taxpayers
Federation

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