With an increasing focus on "encouraging" environmentally friendly behavior, the German government announced on September 1, 2010, as part of its "Agreement for the Future," a distance-based tax on commercial air transportation, covering all flights departing from an airport in Germany beginning on January 1, 2011. In the past, commercial air transportation had been excluded from a consumption-based energy tax on fuel as a result of international treaties and European law.

The tax provision, which is included in draft legislation accompanying the 2011 budget, is expected to generate about €4 billion by 2014 and seeks to set the parameters for a more climate-orientated policy. Under a resolution by the German Cabinet, to avoid circumvention prior to the end of the year, the government is already imposing the tax on all flight bookings for flights with a departure date after December 31, 2010. The bill will, however, still need to be passed by the German Parliament.

While the new rules provide that the aviation tax will be charged to the individual airlines or air transport companies, it can be expected that the airlines will pass on the cost of the new tax to their passengers. Air freight service remains tax free due to very cost-sensitive and intensive international competition. The government decided to introduce this new tax despite the immediate criticism coming from the airlines, expecting in particular a significant decline in air travel from German airports close to the national border.

The amount of tax to be paid will depend on the distance to the final destination. Flights to a destination up to 2,500 km from the point of departure will incur a tax of €8 per passenger. The amount increases to €25 for distances of up to 6,000 km and to €45 for distances beyond 6,000 km. The distance taken into account is that for the entire journey as booked. For flights involving a transfer or short stopover, the tax will be payable only once on the initial departure. If a flight is interrupted by a longer stopover (of 12 or 24 hours), however, the tax becomes payable again from that "new" departure.

In principle, the new aviation tax is intended for all departing flights operated by commercial airlines, but there are certain exceptions: passengers under the age of two and aircraft crews will be exempted, as well as flights conducted exclusively for sovereign, military, or medical purposes. A further exception will apply to island residents flying to and from islands that cannot be reached by land.

Despite the obvious intention to make air travel more expensive, the impact of this new aviation tax, should it finally be resolved, is questionable. Additional information, including examples of the amount of tax due for selected journeys, is available on the homepage of the Federal Ministry of Finance.