Pilot project of a solidarity
contribution
on plane tickets
High Level Dialogue on Financing for Development
New York, June, 27 2005
Presentation by Mr. Thierry BRETON,
Minister of Economy, Finance and Industry
The enlarged Lula group
 A shared assessment:
 Additional, stable and predictable resources are needed in order to reach the Millennium
Development Goals by 2015
 Global issues require global answers
 The benefits of globalization must be shared fairly
 Brazil, Chile, Germany, France and Spain (recently joined by Algeria) have
been working for a year on concrete proposals for innovative financing
mechanisms
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Proposal
 Set up a pilot which:
 Proves the feasibility of innovative mechanisms
 Addresses the most urgent financing needs, in particular for HIV/AIDS, by providing
stable and predictable resources
 This pilot would be based on a solidarity contribution on plane tickets and
is already supported by Brazil, Chile and Germany
 The contribution rate would be:
 Low
 Differentiated between travel classes as well as types of flights (domestic vs
international) for equity purposes
 The proceeds would be earmarked to some development programs, in
particular for the purchase of HIV/AIDS drugs
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Why a pilot project on plane tickets? (1/2)
 A fast growing industry:
 Average annual growth of 9% since 1960
 + 7.4% since April 2004
 Annual growth expected to reach 5% in the coming decade
 A pragmatic mechanism
 Passengers of airline companies are seldom among the poorest
 The contribution rate could be higher for passengers in business and first classes
 As an illustration, a € 5 contribution would merely increase the price of a € 400
holidays package by 1.25%
Source: IATA
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Why a pilot project on plane tickets ? (2/2)
 The solidarity contribution can be implemented by a limited number of
countries without any negative economic impact:
 A low rate contribution would not trigger any evasion nor important distorsions
 The exemption of passengers in transit would ensure that the hubs of participating
countries are not penalized
 No legal or practical impediments:
 A fixed rate contribution on plane tickets is compatible with international agreements
on air transport as well as EU and WTO regulations
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In Europe, Denmark, Malta and the United Kingdom already
have a levy on plane tickets
Existing levies on plane tickets in Europe
United Kingdom
• € 8 to € 64 according
to destination and
travel classes
Denmark
• € 5 to € 10
Malta
• € 23
(to be doubled by
August,1st 2005)
Data: OECD and European Agency for Environment
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Implementation issues
 Payment of the contribution:
Legally
In practice
 By passengers of planes
departing from an airport
located in a participating
country
Airline companies will be in charge of
collecting the contribution
 The contribution will be included like
other airport fees in the total price of
the plane ticket
 As shown in countries which already have a levy on plane tickets,
collection costs are very low:
 Eg. In the UK, collection costs = 0.1% of revenues
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New substantial revenues for development
 2 illustrative scenarii, with a different rate between economy and business classes
 Scenario 1 : € 1 in economy, € 5 in business and first
 Scenario 2 : € 5 in economy, € 25 in business and first
Expected annual revenues with 2002 data
Area of implementation
Worldwide
Scenario 1
Scenario 2
• Around € 2 Bn
• Around € 10 Bn
 A few benchmarks:
 Past commitments from the Global Fund: around € 3 Bn
 Estimated financing gap for the MDGs: at least € 50 Bn
 Current level of total ODA: around € 60 Bn
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Fairness and Diversity between participating countries
 The contribution rate could be different between international and domestic
flights. It could even be nil in the latter case.
 The contribution rate could be lower in some developing countries
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What will be done with the revenues?
 France suggests to earmark a share of the revenues to the fight against
HIV/AIDS
 Purchase of ARV drugs
 Possible participation at a later stage to Advanced Purchase Commitment
mechanisms
 Expenses will be channeled through existing national and international
institutions without any additional cost
 The fiscal sovereignty will be fully preserved. The use of proceeds will be
coordinated between participating countries.
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Next Steps
 Besides the ongoing European talks, 2 major milestones:
 Gleneagles G8 Summit (6-8 July)
 United Nations Summit on MDGs (14-16 September)
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