EU Court Says Lower Tax for Short Flights Was Unfair

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(CN) – The European Court of Justice on Wednesday ordered Ireland to claw back $8.35 for every passenger on short-haul flights, finding its lower airport tax for such flights amounted to unfair state aid.

In 2009, low-cost Irish carrier Ryanair asked the European Commission to examine whether Ireland’s airport tax scheme amounted to illegal state aid in favor of its competitors. The carrier argued that the scheme, which taxed passengers on short-haul flights of less than 300 kilometers from Dublin airport $2.09 while those on flights longer than that paid $10.44, gave an unfair financial advantage to its short-haul competitors.

The commission agreed with Ryanair, and ordered Ireland to claw back the difference – $8.35 per passenger – from the short-haul carriers. Ryanair’s plan backfired, however, since the commission deemed it to be one of the beneficiaries of illegal state aid as well.

Ryanair appealed the commission’s order, joined by Ireland’s flag carrier Aer Lingus. In 2015, the European General Court partially annulled the commission’s order, finding the commission failed to prove the advantage enjoyed by the short-haul carriers was in all cases $8.35 per passenger.

But on Wednesday, the EU high court reinstated the commission’s order, agreeing that the competitive advantage enjoyed by the short-haul carriers was the $8.35 difference between tax rates. Accordingly, the restitution of that advantage required Ireland to recover the difference for each of the passengers on all of the flights concerned – just as the commission ordered, the court said.

The Luxembourg-based court rejected the carriers’ argument that the commission failed to examine whether they had actually gotten an economic benefit from the lower tax, since EU law doesn’t require the regulatory body to do so.

And as for the carriers’ claims that being forced to pay the difference now amounts to an additional tax or discriminatory penalty, the high court said nothing prevents them from raising their ticket prices to help alleviate the sting.

Interestingly, in the years since Ryanair first lodged its complaint about the airport tax with the commission, Ireland dumped the two-tiered tax in favor of a single $3.13 tax – regardless of the distance traveled.