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Improving the competitiveness of Canadian aviation

The International Air Transport Association (IATA) called upon Canada’s policy makers to take actions to improve the competitiveness of the country’s aviation sector including reducing the heavy tax burden. “Canada is home to leading global aviation organizations including IATA, the International Civil Aviation Organization (ICAO) and Airports Council International (ACI), and has one of the world’s most important aerospace sectors. Yet government policies including a high tax burden hamper aviation’s ability to serve as an even greater catalyst for economic growth and jobs creation,”said IATA director general and CEO Tony Tyler in an address to the Montreal Council on Foreign Relations. Tyler compared Canada’s aviation sector with Australia’s, a country with which Canada shares some characteristics in terms of geography, resources, demographics and other areas. According to country studies conducted on behalf of IATA by Oxford Economics: !!! Aviation directly contributes 2.2% of GDP for Canada, but 2.6% for Australia. !!! If catalytic benefits through tourism are included, GDP contribution rises to 2.8% for Canada — and to 6.1% for Australia. !!! Canada’s population is around 50% larger, but Australia has more air travel: 78 million passengers travel to, from and within Australia, compared to 71 million for Canada. “There is one statistic, however, where Canada wins hands down over Australia: aviation’s contribution to taxes. It is about 19% higher in Canada, excluding the impact of domestic taxes on fuel. Were fuel to be included, the difference would be even greater, since Canadian fuel taxes are about double the amount for Australia,”said Tyler. “The Crown rent charged for Canada’s airport infrastructure is a $250 million annual competitive disadvantage. The pain is not only felt by the Canadian air transport sector, which suffers from passengers opting to start their journeys from US airports. Every business that relies on connectivity shares the burden. That is not all. The burden also includes Property in Lieu of Taxes and some of the highest security fees in the world — which can be up to 10 times those charged in the US,”said Tyler. Despite these competitive disadvantages, recent developments provide reason to be optimistic that Canadian policy makers are starting to view aviation as a strategic asset. “The announcement by the government of British Columbia that it is proposing to do away with the provincial tax on international jet fuel from next month is excellent news. In another positive development, Transport Canada has initiated a stakeholder consultation on key policies affecting the competitiveness of the aviation industry. I urge the Minister of Transport, Infrastructure and Communities Denis Lebel to include a look at the impact of aviation taxes in this review. It is important that this consultation process develops consensus on a coherent national aviation policy that supports improved competitiveness in recognition of the catalytic impact of air connectivity on economic growth and development,”said Tyler.

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