Taxing Canadian airports means taxing travellers, too

Montreal, June 23, 2016 – Canadian airports have recently enjoyed a temporary break thanks to lower fuel prices and the weakness of the loonie, but the taxes and charges imposed on them by government remain too high and undermine the competitiveness of the Canadian airline sector, shows a Viewpoint published today by the MEI.

It is worth noting that in 2015, Canada was ranked 130th out of 138 countries in terms of ticket taxes and charges imposed on airports.

Ultimately, it is Canadian travellers who foot the bill. They not only have to pay higher prices for plane tickets, but they also end up with fewer choices in terms of international routes.

Indeed, Canadian airports have to pay rent to the federal government that can represent up to 12% of their revenues. For example, the Montreal Airport Authority (ADM) will have contributed $48 million in 2014.

“Replacing the current system of excessive rents based on a percentage of gross revenues with a tax on companies’ profits would encourage airports to develop their infrastructure more and to reduce the fees charged to carriers and consumers,” argues Alexandre Moreau, author of the Viewpoint and Public Policy Analyst at the MEI.

To this is added the municipal property taxes that airports must pay. Property taxes in Montreal are among the highest in Canada. The Montreal Airport Authority had to pay the City of Montreal the equivalent of $41 million in property taxes in 2014.

“If the goal of Montreal Mayor Denis Coderre is really to improve the positioning of the city in order to remain competitive and attract new direct air links, his administration should make an extra effort to reduce the municipal tax burden,” adds Alexandre Moreau.

As for the federal government, it should abolish the rental system in the interests of the Canadian airline industry as a whole.

The Viewpoint entitled “The Charges and Taxes That Undermine the Competitiveness of Canadian Airports” was prepared by Alexandre Moreau, Public Policy Analyst at the MEI. This publication is available on our website.

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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.

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Interview requests: Pascale Déry, Senior Advisor, Communications and Development, MEI / Tel.: 514-273-0969 ext. 2233 / Cell.: 514-502-6757 / Email: pdery@iedm.org