by Donald Wood
Last updated: 10:43 AM ET, Tue November 28, 2017
There have been plenty of arguments regarding the United States Senate tax bill being proposed, but one provision making headlines focuses on increasing corporate taxes for foreign airlines.
According to CNBC, the proposal was introduced by Sen. Johnny Isakson, R-Ga. and would force airlines based outside the U.S. to pay taxes on the money they earned in this country.
The provision would only be applicable if American carriers do not have at least two weekly flights from the country where the foreign airlines are based.
One of the reasons behind the new airline tax plan is the pushback from top U.S. carriers about government subsidies several Gulf airlines have allegedly received. Officials from top carriers like Delta, United and American claim the Gulf airlines have received $50 billion in subsidies, violating the Open Skies agreements.
In a report from the Wall Street Journal, the new tax proposal would impact carriers from 14 countries and territories, including the British Virgin Islands, Cape Verde, Ethiopia, Fiji, French Polynesia, Jordan, Kuwait, Malaysia, Qatar, Samoa, Saudi Arabia, Serbia, Suriname and the United Arab Emirates.
Three of the biggest airlines impacted by the provision would be Etihad, Emirates and Qatar, which lack reciprocal tax agreements with the U.S. government. As a result, trade groups like International Air Transport Association and U.S. Airlines for Open Skies have come out against the tax bill, saying it would disrupt the precedents regarding foreign aviation taxation.
"Etihad Airways is aware of the language in the Senate tax reform bill, which is widely agreed to be inappropriate under U.S. law and contrary to several international agreements," an Etihad spokesperson told CNBC. "We are working with a broad coalition of industry representatives to inform lawmakers on this issue, which appears to be the result of continued anticompetitive efforts by one or more of the Big 3 U.S. legacy carriers."
The new provision targeting foreign airlines is not guaranteed to be part of the new tax reform, as it must be passed by the Senate and then added to the merged proposal from the Senate and House of Representatives. The tax bill currently in the House doesn't include the new foreign airline taxes.
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