Government reluctance to standup to EU aviation fuel tax spells trouble for Malta – Peter Agius

Government’s unwillingness to stand up to the proposed European-wide taxation on energy will have repercussions on industries and consumers, Nationalist MEP candidate Peter Agius said.

“This is unacceptable as it sets Malta at a further competitive disadvantage when compared to mainland Europe. Maltese consumers would face even higher inflation due to increased transport costs while manufacturing jobs will come under more pressure from competition inside the EU itself as well as outside,” Agius said.

The directive proposed by the European Commission deals with various aspects and not just aviation fuel. The proposal is to introduce a progressive tax on aviation fuel supplied in the EU for intra-EU flights.

The tax will start from a minimum rate of 0% in 2023, gradually increasing by a yearly 10% to reach 100% over a period of 10 years.

Sustainable Aviation Fuels (SAFs) would benefit from a zero-tax rate to promote their uptake in the first 10 years. The taxation of fuel for cargo flights is optional and member states within the context of air service agreements could extend the taxation to non-EU flights.

The proposal requires unanimous approval of all member states since it concerns taxation and talks at European Council level are expected to ramp up in view of the January 2023 target for entry into force of the directive.

Agius explained how the new rules, if adopted, impose excise duties on aviation fuel impacting up to 90% of exports and 85% of imports flown by air.

“Malta is expected to pay the highest price among EU member states with the proposed rules, given that these include an exemption for ‘all cargo’ air movements but not for ‘mixed’ cargo and passenger aircraft,” Agius said.

The MEP candidate said Malta will be “disproportionately affected”.

He said islands like Malta need a “systemic and permanent” safeguard mechanism if the Green deal is to succeed. “Fighting climate change is in all our interest, but it cannot come at a disproportionate cost for islands’ competitiveness, further compounding their insularity.”

He called on the Maltese government to work for an alliance among European islands.

“A temporary derogation is not enough. We need a systemic and permanent mechanism that recognises the particular challenges of islands when it comes to road and air transport. EU rules to advance the fight against climate change should not lead to the perverse result of smaller island economies paying a double price when compared to other Member States,” he said.

He criticised the government for not yet declaring its position publicly on the ongoing negotiations, saying it should use its veto leverage in the council “to secure a systemic and permanent guarantee for the Union to include an insularity test in its ambitious green deal agenda.”

“23,000 jobs in manufacture alone are on the line in Malta if we do not act to protect our manufacturing industry. We must be vigilant to protect these jobs by ensuring that Malta retains its competitive advantage in a highly competitive open market,” Peter Agius said.

READ ALSO: Air Malta says aviation fuel tax could destroy jobs as costs soar and prices rise