Chile Imposes $2 Tax on International Flights

September 15, 2005

Chile has imposed a $2 tax on international flights as part of a United Nations proposal to tax air travel in order to fight worldwide poverty. France and the U.K. have already gone on board with the proposal.

Bloomberg News Reports:

Chile plans to levy a $2 tax on airline flights abroad as of next year, saying that countries need to increase aid to developing nations to help brake an increase in poverty.

Chilean President Ricardo Lagos announced the levy, part of a United Nations funding proposal, today at the United Nations in New York, the Chilean government said on its Web site. The U.K. and France on Sept. 9 agreed to finance aid to developing nations by jointly taxing air tickets.

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With airlines in financial trouble all across the world and with governments granting them generous subsidies over the past decade, it seems an odd time to impose a new tax on air travel.

While global poverty is a problem, a tax on air travel isn’t likely to alleviate it. Despite what some may perceive as international travel being a necessity due to few substitutes, it is still not perfectly inelastic. Therefore, the tax will hurt both airlines and consumers, and will not simply raise revenue equal to the tax rate multiplied by the current volume of travel. And by discouraging tourism, it may do more harm to poor nations than good.

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