Gulf carriers wary of possible changes in US tax reform

Etihad Airways said the new provision appears to be derived from one of the US legacy carriers
Etihad Airways said the new provision appears to be derived from one of the US legacy carriers
By Staff writer
Thu 23 Nov 2017 12:38 PM

Gulf carriers may face a possible new barrier to its flights to the United States if a bill is passed by the US Senate.

The US Senate will vote on a new tax bill that if passed could see Gulf carriers, and those from other countries like Singapore, Serbia and Fiji, hit with a new tax.

Included in Senate's tax bill is a change to long-standing rule that has exempted foreign airlines from corporate taxes.

The amendment, put forward by Senator Johnny Isakson of Georgia (where US carrier Delta is headquartered), would require foreign carriers to pay US corporate tax if a country doesn’t have a tax treaty with the US and if US carriers with at least $1 billion in annual revenue must have at least two weekly arrivals and departures there.

The move is widely seen as targeting carriers from the UAE and Saudi Arabia, where none of the three big US airlines fly to.

Etihad Airways, which will suspend its Dallas route in 2018 due to American Airlines ending its codeshare agreement, said the new provision appears to be derived from at least one of the US legacy carriers. 

“Etihad Airways is aware of the language in the Senate tax reform bill, which is widely agreed to be inappropriate under US law and contrary to several international agreements,” an Etihad Airways spokesman said.

“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 three US legacy carriers.”

Emirates, aware of the proposed provision, declined to comment.

In the wider aviation industry, the most is seen as affecting global aviation in “a major way like nothing else,” according to Abdul Wahab Teffaha, secretary general of Arab Air Carriers’ Organisation.

“There is a real danger it will suppress aviation and it will be bad for the consumer. And there is also the danger of proliferation. I am afraid that many countries will see what the US is doing and will follow suit,” he told Air Transport World.

International Air Transport Association told The Financial Times that, if enacted, it would “upend decades of precedent” and to foreign governments possibly imposing reciprocal taxes in return.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.