September 9, 2005

UK, France to launch air ticket levy scheme for aid

By Katie Allen and Paul Carrel

MANCHESTER (Reuters) - Britain and France are to launch a
scheme to finance aid for poor countries from levies on airline
tickets and expressed hope that more countries would join the
scheme soon, they said on Friday.

France reaffirmed it would raise money with a new tax as
early as 2006 but Britain said it would divert funds from
existing taxes on air travel and there would be no new UK levy.

The two countries have been pressing other members of the
G8 group of rich countries to raise the levy on tickets,
proposed by French President Jacques Chirac earlier this year,
but not all of them have agreed to join in.

"We believe that other countries are now looking at setting
up something similar," said British finance minister Gordon
Brown, announcing the agreement during a European Union finance
ministers' meeting in northern England.

French Finance Minister Thierry Breton said Brazil, Chile,
Spain, Germany and Algeria had also joined an air tax scheme.

Other nations may also join the scheme but not necessarily
implement a compulsory tax.

"Some countries expressed interest to do this on a
voluntary basis," he told a news conference, referring to an
option for passengers to donate a few euros to aid funds when

Breton said he had held talks with U.S. Treasury Secretary
John Snow on contributing to the scheme. "He was at first a
little bit cold. But now we are together. We may offer him to
do this voluntarily," Breton said in English.

EU ministers have repeatedly discussed an air travel levy
to help boost aid spending in order to meet the Millennium
Development Goals, which seek to halve poverty and hunger,
ensure universal primary education and stem AIDS by 2015.

Brown told Parliament earlier this year the UK idea would
be to use for aid purposes some of the 850-900 million pounds a
year it earns from air passenger duty (APD).

That fee paid by departing travelers ranges from 5 pounds
on short economy flights to 40 pounds on long haul business

A France/UK joint statement said talks were continuing on
adopting a similar model of varying levies for different
flights and that a working group would report on how the air
tax for aid scheme would be coordinated before January 2006.

Breton said the scheme would not affect the economies of
countries implementing an air travel tax. "We are only talking
about a few bucks or a few euros," he said.

A European Commission study this month showed a mandatory
EU levy on airline tickets to boost aid could curb air travel
demand and significantly hit airline profitability.

The study said that depending on the level of the tax on
intra-EU and international flights, the whole 25-member EU
could raise between 568 million and 2.76 billion euros
annually, with France, Germany, Italy, Spain and Britain
generating three quarters of the total.

France and Britain urged other nations to join the scheme
which it hopes could contribute to funds raised by a proposed
International Finance Facility (IFF) -- a plan to double aid
spending by issuing bonds using rich countries' future aid
commitments as collateral.

However, that plan has received a cold reception from many
rich countries, particularly economic heavyweight the United

Earlier on Friday, European countries launched a scheme to
provide $4 billion in life-saving vaccines to millions of poor
children under a pilot version of the IFF.

Funds from the airline levy will also be funneled toward
such projects, France and Britain said in a joint statement.