The Arab Air Carriers organisation (AACO) has slammed plans for a proposed United States taxation amendment that targets international carriers on routes not served more than twice weekly by US carriers.
The taxation bill includes an amendment to end tax exclusion for foreign airlines, which are not headquartered in a country with an income tax treaty with the US, and which are not flown to more than twice a week by “major passenger airline carriers headquartered in the United States”. The proposal is effective for taxable years beginning after December 31, 2017.
The amendment was proposed by US Senator Johnny Isakson from Georgia – where US carrier Delta is headquartered. It was passed by the House of Representatives and will now head to the Senate for consideration.
Teffaha described it as a “dangerous” move. “This could develop into reciprocal taxation and other countries may begin doing the same. Taxation is a suppressor to aviation and we call on IATA and ICAO to be vocal in opposing such a move and helping to stop a proliferation of such a move that will be a burden on passengers.”
It will not only be the Gulf carriers that are affected. The American IRS website shows that other countries with no income tax treaty with the US include Saudi Arabia, whose airline has not been the focus of the US majors’ attention, Singapore, Kuwait and Malaysia – and much of South America is missing from the tax treaty list, with the exception of Mexico and Venezuela.
Effectively, if the amendment is adopted then airlines from those countries could face a tax bill simply by landing in the US.
Mohammad Al Bakri, regional senior vice president for IATA told the assembly that IATA opposes taxation arguing that “excessive taxes and charges affect the ability of aviation to meet demand and impede economic growth.”
Abdul Wahab Teffaha makes his point at this morning’s AACO AGM, watched by the AGM chairman, Air Arabia CEO Adel Ali.