Could cheap flights in Germany receive a ‘penalty tax’?

The CSU state group in the Bundestag is demanding a "penalty price tax" on cheap flights within Europe in order to cut carbon emissions, according to a Friday media report.

Could cheap flights in Germany receive a 'penalty tax'?
Photo: DPA

Want to fly from Berlin to Venice for €8? Budget airlines such as EasyJet and RyanAir have made this possible with very low fairs.

But now a paper, to be presented at a retreat of the CSU, the Bavarian sister party of Chancellor Angela Merkel's Christian Democrats (CDU) next Tuesday, is proposing that flights costing less than €50 be subject to a penalty tax, according to BILD.

The exact amount of the tax is not yet known. 

“I want climate protection instead of competitive prices,” CSU leader Alexander Dobrindt told the newspaper.

“€9 tickets for flights in Europe have nothing to do with a market economy or climate protection. We want real freedom of choice in mobility through sustainable pricing of offers.”

The CSU, Germany’s third largest political party and dominant party of Bavaria, therefore wants to introduce a minimum price for airline tickets, according to the newspaper. All flights under €50 would be subject to the penalty tax, to be paid by consumers.

“Flying needs a minimum price and rail travel needs a reduction in VAT (an added tax of 19 percent),” Dobrindt said.

The proposal follows on the heels of the Green party’s proposal to put a complete end domestic flights in Germany in order to cut carbon emissions and incentivize more people to travel by train.

READ ALSO: Trains instead of planes? Could domestic flights in Germany really become obsolete?

Hurting consumers?

The federal government's aviation commissioner, Thomas Jarzombek, rejected the CSU's demands, saying it would ultimately harm lower income passengers.

“We agreed in the coalition agreement not to increase taxes,” the CDU politician told DPA. “It must also be carefully examined whether such a regulation would simply lead to planes flying empty and people with low incomes losing mobility without saving CO2”. 

The Federal Association of the German Air Transport Industry (BDL) was open to the discussion, however. 

“In principle, there should be no objections if the politicians were to find an adequate way to put a stop to uneconomical low prices and artificially inflamed demand”, Chief Executive Matthias von Randow told DPA.

'Climate tax bonus'

The CSU is looking at additional incentives in order to cut carbon emissions, as CSU leader Markus Söder proposed a climate tax bonus of up to €10,000 on Friday.

 “We want a climate bonus, which means that climate protection measures should be tax-deductable up to a sum of €10,000,” said the Bavarian Prime Minister to the “Augsburger Allgemeine” on Friday. 

“Each person would be able to deduct 20 percent of the costs directly from income tax if he saves energy – for example by installing a climate-friendly heating system.”

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Germany and France extend Covid tax breaks for cross-border workers

Germany and France have agreed to extend the relaxation of tax rules for cross-border workers until the end of the year.

Cross-border workers commute by car but they can for now continue to work at home
Cross-border workers usually have to commute but can for now continue to work at home.. Photo: Fabrice Coffrini / AFP

The agreements between France and the governments of Belgium, Luxembourg, Germany, Switzerland and Italy avoids double taxation issues for anyone travelling across the French border to or from those countries in order to work.

During the pandemic, tax rules were eased to allow French cross-border employees, like their counterparts in Belgium, Luxembourg, Germany, Switzerland and Italy, to work from home without having to change their tax status.

The deals, which were established at the beginning of the health crisis in March 2020, were due to end on September 30th – and would have plunged cross-border workers still working from home because of the health crisis into renewed uncertainty over their taxes.

The latest extension of these agreements means there’s no confusion over where a cross-border worker pays their taxes until December 31st – for example cross-border workers who work in Geneva but live in France, who normally pay their taxes and social security contributions in Switzerland. 

Under normal circumstances, anyone living in France who works in Switzerland can spend no more than 25 percent of their time working from home. If they exceed this time limit, they would have to pay these tax charges tin France rather than in Switzerland, which would be much higher.

The agreements between France and Belgium, Luxembourg, Germany and Switzerland “provide that days worked at home because of the recommendations and health instructions related to the Covid-19 pandemic may … be considered as days worked in the state where [workers] usually carry out their activity and therefore remain taxable,” according to the statement from the French Employment Ministry.

In the case of Luxembourg, days worked from home because of the health crisis are not counted in usual the 29 day limit.