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Air security tax to stay at $24, Ottawa says
By Ian Jack OTTAWA - The federal government will not lower the $24 air security charge it imposed in the spring until at least the next budget, the Finance Department said yesterday. The news came in an announcement from the department that it is soliciting public input into a review of the controversial fee, which air carriers contend is driving away passengers. The government imposed the $12 one-way tax on almost all flights to pay for enhanced security following the Sept. 11 terrorist attacks. But less tax has been collected than expected, and the government has pledged to make revenue from the tax match the $2.2-billion air security budget to be spent over five years. "As such, there is little scope for reducing the charge at the present time," the department said. Opposition politicians and some airlines argue one of the reasons revenue is down is the depressing effect of the tax itself. "It has hurt the tourism industry, it has hurt short-haul carriers, it has hurt small communities and it needs to be cut or eliminated," said James Moore, transport critic for the Canadian Alliance. "I'd be interested in finding out who out there in Canada thinks a $24 air tax is a good idea." Air Canada complained earlier this week about the cumulative effect of the "sin taxes" on air travel. Ticket surcharges have "gotten so bad it seems that air travel is subject to more sin taxes than tobacco or alcohol," the airline said in a written submission to the House of Commons finance committee. WestJet Airlines says its short-haul business has been hit hard by the tax, to the point it has pulled planes off some short routes and redeployed them on longer-haul flights where the fare is higher so the tax hit is proportionately less. The carrier is calling for a tiered charge based on distance travelled. "We believe they can continue to collect the same amount of money they have now without [hurting] the ultra short-haul market if they do this," said Siobhan Vinish, WestJet spokeswoman. David Collenette, the Transport Minister, said the government is sensitive to the effect of the tax, particularly on short-haul carriers, but pointed out both WestJet and Air Canada are profitable despite it. The government may have to wait for passengers to come back before it can lower the tax, he said. "[Finance Minister John] Manley is still looking at the matter but ... is rightly communicating the kind of obstacles he has in dealing with this," Mr. Collenette said, adding his officials are working with Finance. He left little doubt it will be Mr. Manley's decision. The Finance Department said its projections show it collecting $400-million to $420-million a year rather than the $445-million it expected, despite passenger levels that are rosier than forecast. Traffic is expected to be down 5.4% this year over 2001 levels instead of the 10% first predicted. While the forecast called for 0% growth for the next four years, officials now expect 3.9% growth next year, then 5.9%, 4.6% and 4.3%. Finance officials hold out some hope an
accounting change that could be implemented in the 2003 budget, expected in
February, could allow for a cut. The change would lower costs by pushing
expenses off to future years. The aviation trade association estimates that
using the accrual accounting method and amortizing security equipment over 10
years could create a $2 to $4 reduction in the tax without hurting overall
revenue. |
