US Senate drops tax-reform provision targeting Gulf airlines

Gulf airlines could have been hit with a large portion of a $200m tax bill if included in recently passed tax-reform bill
Etihad Airways worked with “a broad coalition of industry representatives” to lobby lawmakers on the issue, adding that it “appears to be the result of continued anti-competitive efforts by one or more of the ‘big three’ US legacy carriers.”
By Neil Halligan
Sat 02 Dec 2017 06:01 PM

The US Senate dropped a controversial measure included in its tax-reform bill that could have seen foreign airlines, including those from the Gulf, hit with an estimated $200 million bill over the next ten years.

The provision, introduced by Johnny Isakson, a Republican senator for Georgia - the home state of Atlanta-based Delta Air Lines - called for foreign airlines from nations lacking income-tax treaties with the US to pay corporate duties where American carriers operate fewer than two services a week to those countries.

While none of the Gulf carriers were named in the provision, the measures were seen as targeting their operations. Isakson said it would “protect Georgia airline employees by ending a tax exemption for airlines based in countries that deny fair market access for US-based airlines.”

The US Joint Committee on Taxation said the provision was projected to cost foreign airlines $200 million over 10 years. 

Etihad Airways, commenting before the vote, said it was working with “a broad coalition of industry representatives” to lobby lawmakers on the issue, adding that it “appears to be the result of continued anticompetitive efforts by one or more of the ‘big three’ US legacy carriers.”

US media reported that the provision added in the Finance Committee was stricken from the final version of the 479-page tax bill, which the Senate approved on a 51-49 vote.

'Most significant moment'

The US Travel Association, a national, non-profit organisation representing and advocating for all components of the travel industry, praised the removal of what it described as the ‘Anti-Open Skies Tax Bill Language’.

"A half-baked measure that could've impacted both tax reform and travel was recklessly tossed on the Senate's lap, and wisely disposed of,” the US Travel Association executive vice president Jonathan Grella.

"This is the most significant moment in the three-year war on Open Skies. Bipartisan lawmakers have wisely rejected this last-ditch effort to stymie connectivity and choice.

"Travel, trade, commerce, and diplomacy are all better for the Senate's good work."

The decision comes weeks after UAE airlines Emirates and flydubai placed a combined order of $42bn for planes from Boeing, with a further $1.6bn order placed by the UAE government with Lockheed Martin. 

Last week, UAE's US Ambassador, Yousef Al Otaiba, said US firms are the "preferred' supplier" for UAE’s commercial and military aviation needs

“US exports of commercial and military aircraft, services and equipment to the UAE make up the largest share of America’s $19 billion trade surplus with the UAE,” Otaiba said. 

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