A proposal buried inside the Senate tax bill could cost some foreign carriers, including the Gulf airlines their large U.S. rivals have alleged receive billions of dollars worth of unfair government subsidies.
The provision would certainly force certain airlines based outside the country to pay U.S. corporate taxes on money earned inside the country if U.S. airlines do not have at least two weekly departures to or arrivals by the foreign carrier’s home country, along with also if there will be no reciprocal tax treaty between the U.S. along with also the carrier’s country.
Sen. Johnny Isakson, R-Ga., who will be based in Delta Air Lines’ home state, introduced the proposal. In a press Discharge earlier This specific month, he said the idea would certainly “protect Georgia airline employees by ending a tax exemption for airlines based in countries in which deny fair market access for U.S.-based airlines.”
Delta, United Continental Holdings along with also American Airlines Group complained to the Trump administration earlier This specific year in which the government-backed Gulf airlines have received $50 billion in subsidies by their governments.
In a letter in February to Secretary of State Rex Tillerson, the chief executives of the three carriers wrote in which “the subsidies allow the Gulf carriers to operate without concern for turning a profit” along with also violate Open Skies agreements, which provide foreign airlines access to international routes.
Reuters earlier reported in which the measure could hurt Middle East carriers such as Abu Dhabi-based Etihad, Dubai-based Emirates Airlines along with also Doha-based Qatar Airways because they lack reciprocal tax agreements with the U.S.
“Etihad Airways will be aware of the language inside the Senate tax reform bill, which will be widely agreed to be inappropriate under US law along with also contrary to several international agreements,” an Etihad spokesperson told CNBC in an email. “We are working that has a broad coalition of industry representatives to inform lawmakers on This specific issue, which appears to be the result of continued anticompetitive efforts by one or more of the Big 3 US legacy carriers.”
For its part, the International Air Transport Association, a trade group representing many of the earth’s airlines, said the Senate tax provision would certainly “upend decades of precedent” on foreign aviation taxation.
“Foreign governments — even those not directly affected by the proposed language — could be tempted to follow the U.S. example along with also impose reciprocal taxes,” said IATA spokesman Perry Flint.
While U.S. carriers have alleged the airlines receive unfair government support, some U.S. airports have welcomed these airlines along with also in at least one case offered incentives.
Qatar Airways recently started out flying cargo flights into Pittsburgh International Airport. The airline will receive $15,500 per flight, or about $728,500 for the first six months of its contract, the Pittsburgh Post-Gazette reported earlier This specific month. An airport spokeswoman confirmed the amount.
Gulf carriers are expanding elsewhere inside the U.S. as well. Etihad launched a weekly cargo route to Miami International Airport earlier This specific month, joining Qatar Airways. A spokesman for the airport said the airlines did not apply for any subsidies or incentives.