The State will "engage constructively" in negotiations surrounding an aviation fuel tax or the application of VAT on airline tickets, the Department of Finance said on Monday while Ryanair said further taxation would prove to be "very damaging for Ireland".
A department spokesman noted that the "environmental and fiscal merits for the application of aviation taxes is recognised and Ireland will engage constructively in any future negotiations on this issue".
The comments follow a suggestion by economist Colm McCarthy that air fares could rise by up to 30 per cent on the back of mooted EU tax increases such as a levy on jet fuel and the application of VAT on airline tickets. However, no concrete proposals yet exist.
As the department noted, there is a Dutch and French initiative calling for an EU-wide discussion on the co-ordination of aviation taxation. This has yet to progress, however.
Following the comments reported in The Irish Times, Ryanair said it is opposed to any taxes, given that it will spend €630 million this year on environmental taxes.
"Any further taxes on this already very heavily taxed sector will be very damaging for Ireland, a small island economy on the periphery of Europe which depends on low fare air travel," the airline said.
Ryanair added that it is in the throes of a $20 billion (€18.2 billion) investment in a fleet of new aircraft which have the capacity to reduce fuel by 16 per cent per passenger and CO2 emissions by 40 per cent per passenger.
Even as airlines do invest in greener aircraft, one element of the possible fare increase Mr McCarthy spoke of would not be based on emissions – the VAT charge. As it stands, no VAT is charged by EU member states on airline tickets.
The Republic previously charged an air travel tax which was stopped in April 2014. In the last year of its operations, the tax – a €3 charge on tickets for passengers departing from Irish airports – raised €34.9 million for the State. Were it still in operation today, a 2017 estimation from the then Minister for Finance Michael Noonan suggested it could raise between €45 million and €50 million this year.