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A
U.N. committee on tax is considering taxing airlines in the
countries where they generate revenue, rather than the current
system, which taxes airlines where they are headquartered.
Some countries proposed that change - to "source-based" rather
than "exclusive residence-based" taxation - out of concern that
developing countries do not sufficiently benefit from revenue
created by air travel and shipping in their territories.
"The proposals would be incredibly complex, would not
necessarily lead to taxes in the developing countries that have
been highlighted, because the complexity associated with the tax
environment may well lead to airlines stopping services to those
areas," IATA Director General Willie Walsh told an annual
gathering of the industry body, which represents more than 80%
of global air traffic.
"For governments it would just mean collecting less from their
national airlines and spending huge effort and money collecting
taxes from foreign operators. Only the battalions of accountants
needed to manage the reporting mess will be happy if the change
is made," Walsh said.
The U.N. Committee of Experts on International Cooperation in
Tax Matters has been discussing potential changes to Article 8
of the United Nations Model Double Taxation Convention between
Developed and Developing Countries, most recently at a session
in March.
"The move is provoked by frustration with how shipping, not
aviation, uses flags of convenience to find friendly tax
regimes. ... That is no reason to change the efficient way
aviation pays its corporate taxes," he said.
IATA has said a provision for exclusive residence state taxation
of income from international traffic is vital to the airline
industry to mitigate compliance burdens and risks of multiple
taxation.
Airline margins remain "wafer thin; we're still looking at a
margin of just over 3%", Walsh told airlines on Monday.
"Relief from the parade of onerous regulation and
ever-increasing tax proposals" would help airlines improve
profitability, he added.
(Reporting by Lisa Barrington. Editing by Gerry Doyle)
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