SENATE VOTES TODAY: Tax Fairness Provision is CRITICAL for American aviation & its workers
November 29, 2017 News No comments
The U.S. Senate is scheduled to take up its tax overhaul legislation today. Included in the bill is a provision by Senator Isakson that would establish fairness in the U.S. tax code with respect to international aviation. Already, those who benefit from this preferential treatment are seeking to distort the truth regarding this provision and what it will do. As such, Americans for Fair Skies would like to set the record straight about what this language does and does not do. For even more information, see our post about the Isakson tax fairness provision from yesterday.
Senator Isakson’s provision ensures that the U.S. tax code does not offer preferential tax treatment to foreign airlines from nations that are violating U.S. trade laws. When foreign nations and their airlines cheat our aviation trade policies, known as Open Skies agreements, they distort the international aviation marketplace, thereby depriving U.S. air carriers the ability to compete equally and fairly, as Open Skies agreements intended. This hurts American jobs and should not be rewarded with favorable tax treatment.
Two nations in particular would be impacted by the Isakson provision. Both of these nations are in violation of U.S. Open Skies due to the massive subsidies they have provided to their three respective state-owned airlines, which distort the marketplace and harm competition. The United Arab Emirates, and its airlines Etihad and Emirates, and the State of Qatar, and Qatar Airways, combined have injected more than $50 billion into their airlines in the last decade alone (and this number is still growing). These airlines, in turn, have engaged in predatory expansion and unprecedented capacity dumping, undermining the basic principles of fair competition and violating the trade agreements they hold with the U.S. The Isakson tax fairness provision would ensure that these airlines pay their fair share of U.S. taxes, rather than being allowed preferential tax treatment at the expense of U.S. taxpayers.
- The Senate language ends a tax exemption that applies ONLY to passenger airlines that have income derived from the U.S. and are from nations that deny fair market access for U.S. passenger airlines. Its aim is very hard to argue with: Play by the rules, or, pay your fair-share of U.S. taxes.
- U.S. passenger airlines are blocked from flying to the UAE and State of Qatar due to the market distorting subsidies the nations are offering to their state-owned airlines. It is impossible for U.S. airlines and their employees to compete against the treasuries of nations and their ability to dump seat capacity into markets without regard to basic economic principles and no expectation of a return on investment.
- Senator Isakson’s language recognizes the new reality of global aviation these foreign carriers have created with their violations of U.S. Open Skies policy and adjusts U.S. tax law accordingly, removing a tax benefit from competitors that are in violation of their international agreements and have no regard for market demand and the financial norms of profit and loss.
- The Senate language does not limit these airlines from flying to the U.S., it simply taxes the foreign airlines on their U.S. revenue when there is no reciprocity of competition.
- In addition to their government subsidies, Emirates, Etihad, and Qatar Airways do not pay income taxes in their home nations. And they do not release their financial statements.
- Senator Isakson’s provision would ensure that these airlines would have to file tax returns in the United States, which would help to shed additional light on their finances, adding greater transparency to their subsidies and Open Skies violations.
- Senator Isakson’s provision only impacts passenger operations. FedEx and other cargo operators are not impacted by this provision.
- IATA and others have falsely listed which nations would be impacted by this provision. For example, IATA lists the British Virgin Islands as being impacted, but American Airlines has direct flights to BVI from Puerto Rico so BVI is not impacted. IATA lists Malaysia, but they have no direct flights to the U.S. And IATA lists French Polynesia, however, as a territory of France, they are covered by France’s tax treaty. Facts matter.
- The non-partisan Congressional Budget Office estimates that the tax fairness provision would generate $200 million to the U.S. Treasury. That’s $200 million back to the U.S. taxpayers and away from those who are hurting U.S. jobs.
In Senator Isakson’s own words, “Foreign airlines should not receive preferential tax treatment if their countries choose not to open their market to U.S. companies.”We could not agree more, and we applaud Senator Isakson for his efforts on behalf of American workers and urge the United States Senate to act in support of the Isakson provision.The Senate is already debating their tax reform plan. It’s critical that your voice is heard NOW. Call your Senator and let them know that you want Senator Isakson’s Tax Fairness provision be included in the Senate’s Tax Reform Plan.Don’t know how to reach your Senator? You can find their phone number here:
U.S. Senate: Senators of the 115th Congress