Could Levy Millions In New Taxes Against Brazilian Airlines

The Brazilian tax authority has listed Ireland as a tax haven, which could cost Brazilian airlines millions in new taxes on aircraft leases.

The decision was made without any consultation with the airline industry, according to a report from Reuters. Eduardo Sanovicz, head of Brazilian airline association ABEAR, said that 60 percent of the 520 commercial aircraft operating under a Brazilian flag are leased from companies based in Ireland, where tax laws are favorable to such businesses.

Those companies will be hit with a 25 percent tax on transactions with Brazilian companies, according to the report. The total tax liability could climb to the equivalent of $306 million on contracts up to 10 years, according to Sanovicz.

Brazilian airlines say they have been hit hard by jet fuel prices, which account for 37 percent of airfares compared to 27 percent worldwide, mainly due to taxes collected by Brazilian states.

There has also been a drop in demand for seats on Brazilian carriers, and the airlines say they can't pass along the tax increase to passengers in the form of increased fares.

FMI: www.abear.com.br