Senate Tax Bill Contains a Stealth Attack on Emirates, Etihad, and Qatar

You might have thought that the crux of Senate tax reform legislation was whether to eliminate a slew of tax deductions while reducing rates on various taxpayers. But it’s also a Christmas tree of special interest items that can be achieved through the tax code.

While United and American have gone along for the ride in seeking government help to raise ticket prices and limit consumer choice, Delta has been the ringleader pushing for government to restrict flights to the U.S. by Emirates, Etihad, and Qatar. They’ve aligned themselves with nationalists in the Trump administration and made nasty xenophobic attacks in pursuit of profit by political rather than economic means.

Now Delta’s Senator, Johnny Isakson of Georgia, stuck a provision into the Senate tax reform bill that’s currently under consideration and it’s a stealthy under the radar attack on the Gulf airlines.

Generally countries don’t tax foreign airline profits based on the time those carriers spend on their soil. This is worldwide and reciprocal. This “avoid[s] the messy process of determining how much an airline owes for a brief stop.”

The Senator from Delta has inserted language to tax these Gulf airlines, and in the process other airlines as well, raising very little revenue but imposing a nuisance cost in terms of tax compliance.

The proposal requires foreign airlines to pay US corporate taxes if:

  1. the foreign airline is headquarted in a country without a US tax treaty
  2. US airlines make fewer than two weekly trips to the country

The U.S. does not have income tax treaties with the UAE or Qatar. And no U.S. commercial airline flies to Doha, Abu Dhabi, or Dubai (though of course Fedex operates a hub in Dubai).

Although the measure is clearly aimed at Delta’s enemies – Qatar, Etihad, and Emirates – it will affect other airlines as well including Delta partner Saudia since the US does not have a tax treaty with Saudi Arabia and no US airline flies there. It would apply to several others as well.

For instance it would also impose taxes on Kuwait Airways. Kenya Airways recently was granted permission to fly to the U.S. and the rule would apply to them. Contra Politico, and though there’s no U.S. – Singapore tax treaty, it would not apply to Singapore Airlines because of United’s new Singapore service.

(HT: Joseph K.)

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I’m no lawyer, but isn’t the “two flights a week” provision so narrowly drawn that this would be an illegal “bill of attainder” under the constitution?

  2. @Jerry – Don’t worry about the constitutionality, the Senate certainly doesn’t normally consider that… 🙂

  3. This incredibly misguided, short-sighted, attempt by “Delta’s Senator” (who no doubt already NEVER, EVER has to be bothered with all of the other indignities and unpleasantness like fare fences, ancillary fees for “no-choice choices” now hilariously – and arbitrarily – masquerading under the misnomers such as ‘options’ or ‘perks’, and who probably enjoys all of the best privileges the BOD, CEO, CFO & super duper 50 trillion carats Diamond Medallion elite flyers ever get all for free as a “courtesy” for his position as their…er A and any…US Senator/Member of Congress typically has) is so blatantly, even patently, obvious as an attempt to single out who its intended targets are, that it’s laughable!!!

    Pathetic. Desperate. Lame.

    All that and more don’t even begin to describe this insanity…

    …but they’re a good start!!!

    Oh, and btw, here’s a hint, Delta: it only gets worse from there, especially when considering those brand new Bombardier CS100s that Boeing shamelessly played the protectionist card to start a trade war with Canada, that for now, anyway, look to be either flying straight from the runways at the end of the final assembly line in Montreal into storage – or into the fleets of other airlines instead until the new FAL in Mobile, AL begins cranking those puppies out free from the Boeing instigated 300% it fooled the incompetant ones to level against you?!?!

    Hypocrisy on this truly shameful level certainly does nobody any good.

    So, yes, Delta, you’d be wise to get your Senator to withdraw this “ask” from this – or ANY OTHER FUTURE – pending legislation.

    For this is NOT just an incredibly bad idea – it’s such blatant hypocrisy it’s gobsmacking, mind-boggling, and yes, even full-on stupid.

    That’s how ill-considered, ill-advised and short sighted this effort is.

    Got it?

  4. Oh, I left out the word “punishment” in the above comment!

    The corrected and completed portion (including the spelling error!) of the relevant sentence is as follows:

    “…until the new FAL in Mobile, AL begins cranking out those puppies free from the Boeing instigated 300% PUNISHMENT it fooled the incompetent ones to level against you?!?!”

    [with apologies for the earlier spelling error and omitted word… ]

  5. This is a piece of garbage legislation thrown into a bill to simply to say, “hey, I tried…”
    The mess this would create benefits no one, Delta included, at the end of the day.
    It never passes in current form. Governmental kibuki.

  6. Expecting the same response from every country (airline) which is affected.
    Let’s keep it to ourselves , stop interacting with other countries 🙂

  7. I doubt this will be implemented. Seems like a dumb way to go about setting policy. The correct way is for the Department of Transportation to begin formal review of the pertinent open skies treaties given the obvious cheating (massive subsidies) by the Gulf countries.

    And, by the way, your rhetoric remains WAY over the top. It is by no means “xenophobic” for a US company to complain to the US government that foreign, wholly-government-owned companies are dumping product (in this case airline seats) in violation of a treaty. For a US company NOT to complain would be an outrageous insult to its employees, shareholders and other stakeholders who lose jobs and money due to the cheating by the foreign government.

  8. @iahphx – Delta’s video used a ton of xenophobic rhetoric and imagery. No question.

    What Delta wants to do is use the government to pick the pockets of the American people. They’ve said to explicitly — raise prices, and reduce flight options. That takes money away from passengers and redistributes it to shareholders. Not something the government should be doing.

    In any case — as the Obama administration concluded and is clear on its face to anyone that has actually read the Open Skies treaties — Qatar and the UAE are not violating those treaties.

    Delta has burned through more cash on bad aviation bets than Emirates has by the way…

  9. Oh, and when noting “those ‘bad aviation bets’” Delta has made, plus the baked in “tax preferences” within the US tax code it availed itself of during its LOOOOONNNNNGGG AGO bankruptcy in…when??? …oh, that’s right a decade or so ago…

    Delta has been very generously helping itself to a government subsidized, publicly funded, “INCOME TAX FREE ‘HOLIDAY’” that runs through…wait for it…2019!!!

    Now, getting back to the issue of over the top, full-on, outrageous, obscene, blatant, shameful (or is it shameless?… it’s so hard to tell sometimes…) HYPOCRISY I was noting above…

  10. @gary — Complaining about DL’s rhetoric is rich considering Al Baker and his mouth are on the other side of this issue.

  11. Headline could just as easily accurately read “Senate Tax Bill Contains a Stealth Attack on all of us.”

  12. Hahaha. American carriers emerge from bankruptcy and post a modest profits for several years and are finally able to give their employees a 3%-5% raise for the first time in over 15 years and the American public is up in arms and requesting their representatives to investigate possible “price gouging.” All while the same public has no problem with overly subsidized Arab carriers saturating the American market and transferring jobs and wealth out of the country. Qatar can operate unprofitable half-capacity point-to-point B777 service between cities like Bangkok and Hanoi, or ultra long haul B777 service between Doha and Auckland because they have a steady stream of free oil and are given 0% interest loans by our government or the EU to buy aircraft- not to mention airport facilities built by Indian and Bangladeshi slaves. If they had to compete with American carriers on the same terms, actually paying for their oil and financing, they would need to shrink to about %25 percent of their current capacity to become profitable. All you American travelers who are up in arms about our government trying to promote the airline industry through legislation ought to ask yourselves while your traveling on Emirates to the World Cup 2022 whether you want an airline industry in the United States profitable enough to pay its employees a salary.

  13. Quid. Pro. Quo.

    @This is a good thing: wait who’s getting gouged here? Protectionism’s end result is that the end consumer (ie. you. me, and the rest of the travelling public) gets gouged at the benefit of the corporation due to the removal of competition.
    Also: not all Arab carriers are not “overly subsidized.” Read Gary’s past articles on this subject to see why.
    Also also: oil isn’t free, nor do they receive 0% interest loans from “your government” (aka. Ex-Im Bank) nor are their airports built by slaves.
    Also also also: the ME3 also have employees on their payroll, and they seem to do fine.

    Go back to Breitbart you stupid shill.

  14. At least the ME3 still are buying U.S. made aircraft, while the US3 carriers are going French/German.
    All the ME bashing coming from the US3 is just ridiculous. They have a lot to learn from them.

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