US embassy cable - 05MONTREAL1196

UNCLAS SECTION 01 OF 02 MONTREAL 001196 
 
SIPDIS 
 
SENSITIVE 
 
FROM USMISSION ICAO 
 
USUN FOR IO DAS TERRY MILLER; DEPT FOR IO/T, EB/TRA, AND 
SA/A; FAA FOR FELDMAN AND CAPESTANY 
 
E.O. 12958:  N/A 
TAGS: EAIR, ECIN, EAID, EFIN, UNGA, ICAO, Transportation 
SUBJECT: FRENCH PROPOSAL TO TAX AIRLINE TICKETS - USICAO 
RESPONSE TO DEMARCHE REQUEST 
 
Reftel:  State 162146 
 
This cable is Sensitive But Unclassified.  Please handle 
accordingly. 
 
1.  (SBU) Summary.  The Acting US Representative to the 
International Civil Aviation Organization (ICAO) met with 
the representatives of Canada, Austria, Saudi Arabia, Japan, 
Korea, Russia and Egypt to notify them of the demarche 
(reftel) being delivered in their capitals and to request 
their support.  She also discussed the matter of proposed 
airline taxes and other "innovative" means of financing 
development with ICAO Council President Kotaite.  All 
Representatives with whom she spoke opposed the ticket tax. 
President Kotaite said that for procedural reasons, he would 
not be in a position to offer a statement unless something 
comes out of New York that mentions ICAO.  He said that he 
had met recently with the French Foreign Ministry's 
Secretary General on the proposed airline tax, noting its 
 
SIPDIS 
inconsistency with ICAO policy, and suggesting that payment 
of the tax be voluntary.  End Summary. 
 
2.  (SBU) Per reftel, the Acting US Representative held a 
series of meetings on September 7 on the draft declaration 
on innovative sources of financing to deliver the US 
position and request support. 
 
3.  (SBU) ICAO Council President Dr. Assad Kotaite agreed 
with the US's evaluation of the proposed airline tax as 
contained in reftel in that it is inconsistent with ICAO 
Council resolutions on taxation -- the most recent of which 
was published in ICAO Document 8632, Third Edition, Section 
1, Council Resolution on Taxation of International Air 
Transport (OP 3).  US Rep asked if the President would issue 
a statement on the proposed tax.  Kotaite recalled that 
France had requested insertion of the matter on the next 
(October-November) Council Session agenda in the event of 
"new developments" -- presumably the initiative in New York. 
If/when a UN resolution on the matter mentions ICAO, he 
would be in a position to respond.  He said that if the 
proposal had been for a new "charge" to support 
development/HIV/AIDS research, it would clearly have been 
ICAO-illegal, but an additional tax, Kotaite said, is not 
illegal.  The most ICAO has been able to achieve in 
opposition to taxation of airline tickets is the Council 
Resolution cited above. 
 
4.  (SBU) Kotaite suggested that for political reasons, the 
United States should consider accepting a voluntary tax, 
such as UNICEF contributions requested of (but not required 
from) departing passengers at certain airports.  He said 
that he had recently met with the Secretary General of the 
French Foreign Ministry about the GOF's airline tax 
proposal.  Kotaite said that he had told him that the tax 
would be inconsistent with ICAO policy and therefore the GOF 
should consider instead a voluntary contribution.  He said 
the French official appeared to like the idea and would 
raise it with others in his government.  The US Rep 
responded that even a voluntary tax poses problems, 
including the difficulty of insuring clarity and 
transparency on management and distribution of the proceeds. 
 
5.  (SBU) The US Rep then met with likely Council 
supporters:  Austria, Canada, Japan, Russia and Korea 
(Australia, China and Singapore, also allies, are away on 
vacation).  The Austrian Representative said that her 
government did not favor the tax, but this was a matter on 
which there was no EU consensus.  The airline ticket tax had 
been discussed in the EU's Financial Council in June, but no 
agreement had been reached.  Thus, as far as she knew, it 
was still an "open subject." 
 
6.  (SBU) As far as Japan was concerned, the proposed ticket 
tax went beyond the competence of ICAO (all others agreed 
with him).  His government was "very negative" on the 
subject, and believed the matter should be discussed in the 
broader context of development assistance. 
7.  (SBU) The Canadian Ambassador agreed with the objective 
(of providing increased development assistance), but not the 
means, as a global tax is "not the appropriate way."  Given 
differences in tax laws from country to country, the 
proposal would require a harmonization of fiscal regimes 
before it could be implemented.  This is something that 
should be left up to the political leadership in New York, 
not ICAO.  The current price of oil was another 
consideration.  He promised to forward the US talking points 
to Ottawa. 
 
8.  (SBU) The Korean said that his government was flatly 
opposed to the ticket tax.  Implementation of the tax would 
be difficult, particularly in view of the increasing price 
of oil and the deteriorating state of the aviation industry. 
Additional taxation will only further reduce demand for 
travel by air.  He said he would ask his capital to support 
the United States on this in New York. 
 
9.  (SBU) The Russian Ambassador said that his government 
was also opposed to the tax, with his Civil Aviation 
Authority "strongly opposed."  ICAO was not the appropriate 
forum to discuss development assistance; implementation 
would be very difficult. 
 
10.  (SBU) Egypt and Saudi Arabia opposed the tax, Egypt 
because of difficulties of implementation and lack of 
transparency on use of the proceeds, Saudi Arabia because it 
is opposed to any tax on airline tickets.  Both said they 
would forward our talking points to their capitals for 
further guidance and to request support for the US position 
in New York. 
 
11.  (SBU) While discussion with ICAO Reps focused 
overwhelmingly on the proposed ticket tax, there was also 
interest in the US position on the IFF and the 0.7 percent 
GDP commitment.  They also asked for a copy of the New York 
Declaration, which the US Rep has provided, so that they 
could forward the entire package to capitals. 
 
Serwer Marshall