April 9, 2012

Davvero in grande difficoltà. Roughly translated, that’s Italian for “really big trouble” and it’s perhaps a good way to describe the economic situation in Italy right now. As NBAA reported earlier this year the government in Rome is combating its economic problems with a bevy of new fees and taxes – one of them a levy on all civil aircraft that spend more than 48 hours on the ground in Italy. In the case of aircraft that weigh more than 10,000 kilograms (22,046 pounds), that could mean more than €300,000 ($393,630) in annual taxes.

Last week, NBAA staff members met with officials at the Italian embassy in Washington, hoping to educate them on the effect this tax will have on commerce between Italy and the United States. The European Business Aviation Association (EBAA) is also working with Italian officials to help educate them on the tremendous negative impact the tax will have on aviation throughout Europe.

“The tax was originally intended to apply to Italian-registered aircraft only. But then officials became concerned that Italian aircraft owners would re-register their planes in other countries,” explained Scott O’Brien a Project Manager in NBAA’s Operations Service Group. “So they applied it to all aircraft, regardless of nationality. When they did that, they didn’t realize the chilling impact it would have on business aircraft traffic to Italy.”

NBAA representatives pointed out to Italian officials the positive economic impact of business aircraft operations:

  • During the peak summer season more than 600 business aircraft flights take place to, from, or within Italy. Even during the winter season, there are over 300 business flights every day.
  • During the peak summer season, one fuel provider reported fuel sales of over $2.5 million per month.
  • When a business aircraft lands in Italy, the average cost of that stop (including handling and fees) is nearly $2,500.
  • Milano Linate and Roma Ciampino are consistently ranked among the top 10 busiest airports for business aviation in all of Europe.

As a result of the new civil aviation tax, the Italian aviation industry is already experiencing significant negative effects:

  • NBAA research found that the Olbia business terminal in Sardinia has experienced significant cancellations, as operators are unwilling to travel there due to fear of the tax.
  • Handlers are reporting a decrease in activity at Florence and Venice.
  • Authorities at the Milan airport report that business aircraft are re-positioning to nearby countries such as France, Switzerland, and Slovenia as a direct result of Italy’s new tax.

During the meeting with Italian government officials in Washington, O’Brien said NBAA representatives suggested a number of possible solutions to lessen the impact of the aviation tax. One solution is to extend the allowance period, before the tax is due, from 48 hours to 45 days (or more). This would achieve the goal of discouraging true Italian aircraft owners (that base their aircraft in Italy) from registering aircraft in another country. Also, it would prevent the tax from being applied to foreign-registered aircraft that are visiting Italy.

Recently, the Italian government passed legislation to exempt foreign-owned boats (not belonging to an Italian individual/entity) from the tax. A similar solution could be applied to aviation entities.

“The embassy official with whom we met was very receptive to our message,” O’Brien said. When NBAA representatives suggested that the tax could seriously harm the country’s aviation economy, O’Brien said the embassy official promised to communicate the Association’s message with officials in Rome right away.

In the meantime, even though there is still confusion about how the Italian government will actually collect the tax, O’Brien warned NBAA Members to take the situation seriously.

“Our main advice is: don’t spend more than 48 hours on the ground in Italy right now,” he cautioned. “Document what time you do spend on the ground there.”

For additional information, visit NBAA’s web page on the Italian tax plan.