Departure tax hike 'incompatible' with EU law

The hike in the air departure tax as announced in the budget is incompatible with EU law and would need to be revised or repealed altogether, according to a legal case built by Nationalist MEP Simon Busuttil.

Among other arguments, in its current form, the departure tax breaches the right of the Maltese to free movement under EU law, Dr Busuttil, a lawyer by profession and the former head of the Malta-EU Information Centre, told The Times.

The government's decision to double the tax to Lm20 - over and above the passenger service charge of Lm6.52 - with effect from August 2005, makes the Maltese the most taxed passengers in Europe. The increase was met with a chorus of disapproval by many who claimed it was a prohibitive tariff that restricted the freedom of movement of Maltese citizens. When contacted, a spokesman for the European Commission said that prima facie and basing his comments on what had been reported in the press it did not appear that the tax was discriminatory against the Maltese.

But Dr Busuttil built up a number of legal cases that can be used to challenge the revised airport tax even if, like other EU countries, the Maltese government had the right to apply the tax measures it deemed fit. The tax, however, raises questions on the freedom to provide services.

"For instance, does the tax make it less attractive for foreign airlines to operate from Malta? And, more importantly, does the tax make it more difficult for Maltese citizens - as recipient of services?" the Nationalist MEP asked.

"And does this tax discriminate between tourism services offered in Malta and tourism services offered abroad at the expense of the recipient of the service? I would say yes on all counts."

Dr Busuttil said that although one appreciates that exempting tourists from the tax was important, the difference in treatment does raise the question whether this constitutes a form of state aid or even a form of protection for Malta's tourism sector.

This point would not apply if, for instance, the airport tax applied to all flights leaving Malta rather than just for flights originating in Malta. The issue of state aid must therefore be raised, Dr Busuttil said.

The increase in the departure tax does not apply to maritime services and, therefore, the government appears to be favouring the cruise liner industry when compared to air transport. This raises questions of unfair competition and state aid, Dr Busuttil held.

Most importantly, there is the obvious consideration of the right of Maltese citizens to travel freely, known as one the main pillars of EU law.

Though this point remained a grey area, Dr Busuttil said that one had to raise the question whether the airport tax, particularly at the increased rate, makes it prohibitively onerous for Maltese citizens to exercise their right of free movement.

"For instance, does the revised tax at Lm20 make it too expensive for a family of four or five to travel? Or does the fact that some flights advertised at Lm17 are cheaper than the departure tax make any material difference?

"Malta is an island and consequently we are restricted in our choice of transport means. We cannot drive out of the country or catch a train. We are constrained to use the plane, which is already one of the most expensive means of travelling."

Rounding up his arguments, Dr Busuttil said it was not the tax as such that may need to be removed altogether but the way it has been imposed.

Commission spokesman Stefaan De Rynck told The Times yesterday he did not believe the Lm20 departure tax would flout one of the Union's cardinal principles, the free movement of persons. But he pointed out that such a case was unprecedented and that the Maltese were free to challenge the tax in court if they felt discriminated against.

The spokesman said that from information available to the Commission, extracted from the press, the tax seems to apply to anyone buying a ticket in Malta. "There is no discrimination between citizens from different EU countries - a Spanish person buying a ticket in Malta will get the same treatment as a Maltese citizen.

"The EU could take action when its citizens are treated in a discriminatory way, which does not seem to be the case here. The EU does not regulate airport taxes and, therefore, this is a national matter."

Sources close to the travel industry said the government had worded the tax to apply to all departing passengers from Malta to try and remain in line with EU rules.

"What the EU might not be aware of is that about 99 per cent of all passengers leaving Malta are Maltese and not expatriates," the sources said.