You might have thought that the crux of Senate tax reform legislation was whether to eliminate a slew of tax deductions while reducing rates on various taxpayers. But it’s also a Christmas tree of special interest items that can be achieved through the tax code.
While United and American have gone along for the ride in seeking government help to raise ticket prices and limit consumer choice, Delta has been the ringleader pushing for government to restrict flights to the U.S. by Emirates, Etihad, and Qatar. They’ve aligned themselves with nationalists in the Trump administration and made nasty xenophobic attacks in pursuit of profit by political rather than economic means.
Now Delta’s Senator, Johnny Isakson of Georgia, stuck a provision into the Senate tax reform bill that’s currently under consideration and it’s a stealthy under the radar attack on the Gulf airlines.
Generally countries don’t tax foreign airline profits based on the time those carriers spend on their soil. This is worldwide and reciprocal. This “avoid[s] the messy process of determining how much an airline owes for a brief stop.”
The Senator from Delta has inserted language to tax these Gulf airlines, and in the process other airlines as well, raising very little revenue but imposing a nuisance cost in terms of tax compliance.
The proposal requires foreign airlines to pay US corporate taxes if:
- the foreign airline is headquarted in a country without a US tax treaty
- US airlines make fewer than two weekly trips to the country
The U.S. does not have income tax treaties with the UAE or Qatar. And no U.S. commercial airline flies to Doha, Abu Dhabi, or Dubai (though of course Fedex operates a hub in Dubai).
Although the measure is clearly aimed at Delta’s enemies – Qatar, Etihad, and Emirates – it will affect other airlines as well including Delta partner Saudia since the US does not have a tax treaty with Saudi Arabia and no US airline flies there. It would apply to several others as well.
For instance it would also impose taxes on Kuwait Airways. Kenya Airways recently was granted permission to fly to the U.S. and the rule would apply to them. Contra Politico, and though there’s no U.S. – Singapore tax treaty, it would not apply to Singapore Airlines because of United’s new Singapore service.
(HT: Joseph K.)