Aviation tax does not make sense: London Free Press’ Macartney
By The London Free Press
Nov. 17, 2014, London, Ont. - The London Chamber of Commerce has a serious concern with the government of Ontario’s move in its 2014 budget to phase in a 148% increase to the province’s aviation fuel tax over the next four years. The first of four one-cent increases took place on Sept. 1, eventually raising the tax from 2.7 cents to 6.7 cents a litre.
By The London Free Press
The move to increase the aviation fuel tax is inconsistent with the interests of Ontarians as it will hinder job creation, economic growth, trade and the development of Ontario’s vital travel and tourism sectors.
The London chamber stands with other chambers, businesses, municipalities, airport authorities, tourism operators and consumer organizations across the province in opposing this massive increase. It is out of step with most of Ontario’s provincial counterparts and neighbouring U.S. states.
In 2012, the B.C. government eliminated its aviation fuel tax for international flights in recognition of the value of the aviation industry as an economic engine and an enabler of trade, travel and tourism. Since then, it is reported that 22 airlines have added flights to Vancouver, each of which brings new jobs and economic activity. In fact, the B.C. government has indicated that the initial $12-million loss of revenue was superseded by an estimated $20 million in new payroll and consumption taxes in the first year.
These are the types of forward-looking policies we need in Ontario to create jobs and keep the recovery on course.
A new report by Fred Lazar of the Schulich School of Business at York University finds that increasing the aviation fuel tax in Ontario by 148% could mean a loss of nearly 3,000 jobs, decrease provincial GDP by almost $100 million annually and drive another 400,000 air travellers out of Ontario to neighbouring U.S.-based airports. The study projects that, over the long term, the catalytic effect of increasing the aviation fuel tax by four cents per litre could cost the province up to $1 billion in lost GDP by 2030.
Raising the aviation fuel tax will mean lost opportunities for Ontario. Already, jobs and dollars are being lost because of the three million Ontario travellers and more than five million Canadians who choose to drive across the border to fly out of U.S. airports. Sadly, Canadians make up almost 40% of passengers at Buffalo airport and up to 70% at the Niagara Falls, N.Y., airport.
Travellers in the Southwestern Ontario are already more frequently using Detroit’s airport for perceived savings on passenger tickets. Increasing the fuel tax will only exacerbate the leakage of jobs and economy-stimulating spending to the U.S.
The London Chamber has taken a keen interest in the competitiveness of Canadian airports. What we have learned through this process is that the U.S. government spends seven times more on the infrastructure of its airports compared to Canada. This places our airports at a huge competitive disadvantage, which is reflected in the price of a ticket.
Clearly, the U.S. government views the aviation sector as an economic generator that stimulates the economy and not as a cash cow from which to milk more money.
We have always viewed the London International Airport as one of the main drivers in the growth of our city’s and region’s economy. And, while we understand the critical importance of funding infrastructure projects across the GTA and elsewhere, it is counterintuitive and counterproductive to fund one element of that infrastructure by increasing the taxes applied to another. In other words, there must be better solutions to our infrastructure needs than by negatively impacting an entire other sector, particularly one so vital to our economic future
We are asking the government of Ontario to defer any further aviation fuel tax increases until a full study of its economic impacts can be completed with meaningful input from Ontario municipalities, consumer organizations, airports, tourism operators, airlines and other affected parties.