Inside Logistics

Airports unhappy with tripled tax in Ontario

Tripled tax on aviation fuel will be passed on to shippers and travelers


July 14, 2014
by MM&D Online Staff

OTTAWA, Ontario—The Canadian Airports Council today said it is disappointed with the Ontario provincial government’s decision to go ahead with the 148 percent increase in the province’s aviation fuel tax over the next four years, calling instead for the province to work more closely with the aviation sector on ways to strengthen it. The National Airlines Council of Canada (NACC) also expressed its disappointment.

“Aviation is an important industry for Ontario, helping drive other parts of the economy and providing Ontarians with access to the world,” said Canadian Airports Council president Daniel-Robert Gooch. “Airports are working to help Canada grab a healthy share of the growing global market for air travel and tourism.  It’s time for the province to work with airports, air carriers and our partners in tourism and business to support this sector’s growth in ways that will benefit not only industry employers, but consumers and taxpayers as well.”

“It is extremely disappointing that the Ontario Government has chosen to proceed with this tax increase without consultation and a thorough understanding of its damaging consequences.  This massive increase punishes consumers, makes Ontario a less attractive destination to invest and expand into, and will exacerbate an already large competitiveness gap with neighbouring U.S. airports.  Sadly, the big winners of this budget are the economies of Buffalo/Niagara, Detroit, Minnesota and other U.S. border regions,” said Marc-André O’Rourke, Executive Director of the National Airlines Council of Canada.

As formalized in today’s budget, Ontario’s tax on aviation fuel will triple—an increased cost that will be passed on to air travellers and shippers in the form of higher fares and shipping costs. Airport opposition joins concerns expressed by airline and tourism partners, while the Canadian Chamber of Commerce has named travel and tourism competitiveness as one of the top ten barriers to Canadian competitiveness two years in a row.

It is not clear that the increased aviation fuel tax will result in additional revenue for the province. Vijay Gill of the Conference Board of Canada, who has examined the economic costs associated with losing about five million air passengers to cheaper US border airports, says a significant portion of the new tax revenue projected by the measure could be lost if traffic decreases at Ontario airports as a result.

Meanwhile, a recent report from Fred Lazar of the Schulich School of Business projects a $67-97 million cut to provincial gross domestic product from the measure, with a negative impact on 2,000-3,000 jobs.

The economic benefits of air transportation are significant and, as part of a high value supply chain, the air travel sector is also vital to the success of many other industries across Ontario including manufacturing, airports and related services, tourism and freight.  The Lazar study projects that, over the long-term, the catalytic effect of increasing the aviation fuel tax by four-cents-per-litre will cost the province up to $1 billion in lost GDP by 2030.