Competition Authority weighs in on regional aircraft noise tax

Both the Italian carriers' association (Assaereo) and the Italian airport association (Assaeroporti) have raised concerns over the effects of the new regional tax on aircraft noise implemented in six regions – Lazio, Lombardia, Emilia Romagna, March, Calabria and Campania (for further details please see "New tax on aircraft noise raises concerns"). On August 27 2013 the Italian Competition Authority responded to these concerns by issuing a communication to Parliament and the government under the Competition and Fair Trading Act (Law 287/1990) regarding the competition distortions caused by the varied implementation of the tax.

The communication follows complaints submitted to the authority by Società Aeroporti di Roma SpA (the management company of Rome's Ciampino and Fiumicino airports), Assaeroporti and Assaereo. The issues and concerns raised in their claims have mostly been addressed in the authority's communication. In particular, the authority assessed the potential distortive effects on competition of the implementation of the new tax in the Italian regions.

The authority noted that certain material differences in the assessment and collection of the tax in each region were not justified on technical or geographical grounds, but were merely due to a lack of proper coordination among the regions. As a consequence, such differences will inevitably and unjustifiably alter the investment return conditions of air carriers that operate in different airports.

The authority further noted that these circumstances will clearly have distortive consequences for competition among sector operators, as well as negative effects for passengers. In particular, the most relevant effects will be on:

• air carriers that mainly operate in airports where the tax rate is higher, and that cannot easily transfer their operations to another airport;
• passengers who will be more attracted to airports where the tax rate is lower, as the flight fares applied by the air carriers operating in such airports will thus be lower; and
• the management companies of the airports subject to a higher tax rate, which will face a reduction in the number of air carriers and passengers.

Moreover, in its communication the authority considered other important weaknesses of the regional tax regime, such as the lack of an efficiency ratio in the parameters of tax calculation and collection. For instance, unlike the law of other EU member states, the Italian tax regime does not take into account the particular urban characteristics of each airport, the actual noise level of particular aircraft and the distinction between daytime and night-time flights.

In addition, the new tax does not seem to comply with its specific and main purpose, as in some regions (eg, Lazio) only 10% of the collected amount is assigned to the management of the social costs arising from aircraft noise (eg, airport monitoring systems, anti-pollution measures and indemnification of communities affected by aircraft acoustic pollution).

Finally, the authority also suggested measures that should be adopted at a national level to remove the risk of competition distortion, as well as uniform standards for the implementation of the tax across the regions. Such criteria should set the tax level according to the type and characteristics of aircraft with the aim of avoiding arbitrary discrimination among airports, their management companies and air carriers. In this regard, Parliament should consider the criteria adopted by other EU member states, such as:

• different rates for daytime and night-time flights;
• tax rates and tax collection parameters based on the aircraft's noise efficiency, instead of its weight; and
• a set of rates that take into account the distinct urban characteristics of airports' surrounding geographical areas.

The suggested measures should also be combined with adequate provisions to ensure that tax revenues are allocated mainly for noise abatement measures, which would be the only way to fulfil the main purpose of the tax and to justify the negative impact on aviation sector competitiveness.

For further information on this topic please contact Laura Pierallini at Studio Legale Pierallini e Associati by telephone (+39 06 88 41 713), fax (+39 06 88 40 249) or email (l.pierallini@pierallini.it).