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Application for judicial review of the Air Travel Tax Act unsuccessful

Press Release No. 99/2014 of 05 November 2014

Judgment of 05 November 2014
1 BvF 3/11

The Air Travel Tax Act (Luftverkehrsteuergesetz – LuftVStG) is compatible with the Basic Law (Grundgesetz – GG). The First Senate of the Federal Constitutional Court rendered this decision in its judgment pronounced today. Raising and design of the tax, which lies within the legislative competence of the Federation, does not violate the principle of equality.  Nor does it violate the freedom of occupation of the airlines and their passengers.

Facts of the Case:

Effective 1 January 2011, the Air Travel Tax Act imposes a tax on commercial passenger flights departing from Germany, but not on non-commercial flights and cargo flights. Exempt from taxation are also government, military and medical flights, supply flights to and from the German islands in the North Sea with no connection than by sea as well as transit and transfer flights. In addition to generating annual revenue of 1 billion Euros, the legislature intended the tax as an incentive encouraging a more environmentally-balanced behaviour in air travel. The government of the Land of Rhineland-Palatine has applied for a review of the Air Travel Tax Act by way of abstract review proceedings.

Key Considerations of the Senate:

The rules of the Air Travel Tax Act essentially challenged by the application for judicial review are compatible with the Basic Law.

1. The legislative competence of the Federation to pass the Air Travel Tax Act is based on Art. 105 sec. 2 alternative 1 GG in conjunction with Art. 106 sec. 3 GG. The Air Travel Tax is a miscellaneous traffic tax for motorised transport within the meaning of Art. 106 sec. 1 no. 3 GG that falls within the competence of the Federation. Beside road traffic, the concept of transport also comprises transport by ship, rail and air.

§ 11 sec. 2 LuftVStG authorises the Federal Ministry of Finance to reduce the tax rates, by way of regulation, at the beginning of a calendar year in proportion to the previous year’s revenue from greenhouse gas emission allowance trading. This authorisation meets the requirements stipulated in the Basic Law for a legal authorisation of the government to issue regulations in the field of tax law. It does not entitle the executive branch to decide on „if“ or „how“ the  air travel tax is reduced, but only allows it to make the mandatory annual reassessment of the tax rates in accordance within a clearly defined final framework. 

2. The rules submitted for judicial review are in compliance with the principle of equality in Art. 3 sec. 1 GG regarding the determination of the taxable object, the tax privileges and the design of the tax scale.

a) By burdening commercial passenger flights, the legislature has chosen the object of taxation in compliance with the Constitution. The legislature was not obliged to also impose the air travel tax on non-commercial and cargo flights for reasons of equality. By virtue of its democratically legitimated extensive leeway in choosing taxable objects, the legislature is not required under the principle of equality, once a specific object of taxation is chosen, to also tax all similar taxable objects suitable for the tax purpose. Only after the object of taxation has been chosen is the legislature bound by the stricter rules of Art. 3 sec. 1 GG in designing the tax law.

b) The tax exemptions provided for in the Air Travel Tax Act are based upon valid factual reasons. The tax exemption for island supply flights secures the subsistence of the islanders. The exemption of military and other government flights already follows from the chosen object of taxation.  The tax privilege for transit and transfer flights is intended to protect the German airports as international hubs by imposing on them a lower burden because of this function.

c) The challenged design of the tax scale does not violate the general principle of equality.  By linking the taxation to the distance travelled by the flight, the legislature has chosen a sufficiently realistic standard of taxation in line with the act’s purpose of environmental protection. Unequal burdening caused by the fact that the tax rate is connected to the distance to the largest commercial airport in the country of destination instead of the actual destination airport, does not result in the tax standard determined by the legislature being incompatible with Art. 3 sec. 1 GG.  Only in a few very large countries or in case of flights to a few countries’ overseas territories does the country of destination’s tax-relevant airport with the highest volume of traffic incorrectly reflect the actual distance travelled.  For the sake of simplification, such minor distortions are tolerable under equality principles.

3. Taxation of commercial passenger flights neither violates the airlines’ nor the passengers’ freedom of occupation. The air travel tax does not interfere with the passenger’s freedom of occupation because it contains no occupation-regulating component in this respect.  An impairment of the airlines’ freedom of occupation is justified by the legislature’s intention to protect the environment.