U.S. tax bill will hit Gulf carriers

KdcLtd.com – One part of the proposed Senate tax bill could cost some foreign carriers, such as Emirates, Qatar Airways and Etihad if U.S. politicians get their way. After long-held complaints by U.S. carriers that the Gulf airlines have been on the receiving end of billions in subsidies from their governments which has put them at an unfair advantage to their competitors.

The piece of legislation would make some foreign-based carriers liable for U.S. corporate taxes on revenue generated in the U.S. if American airlines with at least $1 billion in annual revenue have less than a minimum of 2 weekly departures or arrivals in the foreign airline’s own country. This will come into effect if there is not an agreement in place already between the U.S. and the airline’s home country.

This legislation will specifically hit Gulf carriers in Qatar and the UAE as the U.S. does not currently have any of its big airlines flying to that region. Other countries caught up in the changes include the BVI, Ethiopia, Fiji, French Polynesia, Jordan, Kuwait, Malaysia, Samoa, Saudi Arabia, Serbia and Suriname. Carriers based in Asia and Europe will see little if any change as there are many routes between the destinations already.

While there have been long-held complaints that the Gulf carriers have been benefitting from government subsidies of up to $50 billion since 2004, the fact that the American airlines have resorted to using what is in effect government intervention themselves to retaliate, or level the playing field, has also raised some eyebrows.

A representative from Etihad said in response that “Etihad Airways is aware of the content in the Senate tax reform bill, which is generally agreed to be improper under US law and contrary to several international agreements. We are working with a wide 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 main US carriers.”