The Latin American Aviation Conference in Buenos Aires has sparked a critical discussion about the urgent need for a comprehensive overhaul of tax systems in the region. The goal: to fuel growth and competitiveness within the travel industry and ensure its long-term sustainability.
At the center of the debate, held during the ALTA Aviation Law Americas conference, was the impact of fiscal policies on the aviation industry’s performance. A panel titled “Taxation Challenges: Threats to the Aviation Industry in Latin America,” led by Marcelo Guaranys, a partner at Demarest Advogados, delved into the complexities of the issue.
The discussion focused on a proposal by the UN Tax Committee to transition from the current residence-based tax system, where airlines are taxed in their home country, to an origin-based system. This new model would shift the responsibility of collecting taxes to each country where airlines generate revenue.
Guaranys highlighted the importance of simplifying taxation for airlines, given the sector’s unique characteristics and international nature. “The proposed measure could result in double taxation, both in the country of origin and the destination, ultimately leading to increased costs for airlines and, consequently, for passengers,” he cautioned. “We must ensure that aviation remains a competitive and accessible sector without adding unnecessary obstacles.”
Carlos Protto, Director of International Tax Relations at Argentina’s Federal Revenue Agency, voiced concerns about the structure of the UN Tax Committee, where tax experts operate in a personal capacity, potentially weakening the proposal’s effectiveness. “We need a proper balance between tax collection and fostering an environment conducive to the growth of the aviation sector,” he stated, emphasizing the importance of aligning global policies to combat tax evasion and promote fairness.
Data from the 2024 Competitiveness Index, a collaborative effort by ALTA and Amadeus, reveals that Argentina bears the highest tax burden in the region on airline ticket sales, accounting for a staggering 72% of the final price. In contrast, countries like Brazil and Chile have adopted more favorable policies by exempting international tickets from VAT. This disparity highlights the crucial role of supportive fiscal policies in promoting international air travel by maintaining competitiveness and ensuring accessibility.
Ligia da Fonseca, IATA’s Global Head of Tax Policy, stressed the urgency of global tax harmonization. “The current UN Tax Model Convention minimizes unwarranted administrative and financial burdens for airlines while fostering a stable fiscal environment to support air connectivity, economic growth, and social development,” she explained. However, she expressed concern regarding the potential revision of Article 8 of the said convention, which could lead to the double taxation of airlines’ profits.
The IATA representative emphasized the importance of adhering to existing international tax policies, approved by the International Civil Aviation Organization (ICAO), to mitigate negative impacts on the aviation sector, particularly in developing countries.
The panel concluded with a strong call for greater collaboration among governments, airlines, and international organizations to establish a harmonized tax system. This collaborative effort, it was agreed, is crucial for boosting competitiveness and fostering the sustainable growth of aviation across Latin America.
