November 2024: Despite the growing recognition of the polluter pays principle – the idea that those responsible for emissions should also pay for them – aviation has slipped under the radar when it comes to taxation. Aviation fuel enjoys a privileged tax regime, in that it is not taxed at all. Many consider aviation fuel tax to be restricted under international law and international legal agreements.

Opportunity Green’s latest legal analysis shows that the idea that aviation fuel tax is legally prohibited is in fact a legal myth. Its key findings are:

1. States can tax the intake of aviation fuel by international aircraft under the 1944 Chicago Convention.

2. A state which is subject to the common fuel tax exemption ‘on the basis of reciprocity’ under an air services agreement is free to tax aviation fuel on flights to the other state(s) under that agreement.

3. Within the EU, Member States can tax aviation fuel used in domestic flights and flights between two or more Member States that have agreed to such a tax.

4. As at the date of this paper, EU Member States cannot generally impose fuel taxes on international flights outside of the EU, subject to certain exceptions.

5. The UK could tax aviation fuel on flights to the EU and the EU could tax aviation fuel on flights to the UK.

Read the legal briefing in full below.