A provision in the U.S. Senate tax bill would crack down on income-tax exemptions provided to a trio of airlines based in Qatar and the United Arab Emirates, which are in an increasingly spiteful trans-Atlantic battle with Delta, United and American.
ATLANTA — For the past two years, Delta Air Lines has spearheaded a campaign to get U.S. policymakers to punish some of its fiercest fast-growing competitors from the Persian Gulf.
The Atlanta-based carrier’s push has been largely fruitless so far — but that may soon change if a provision tucked into the U.S. Senate tax bill becomes law.
Sen. Johnny Isakson, R-Ga., added language to his party’s tax-overhaul plan earlier this month that would crack down on income-tax exemptions provided to some of Delta’s international competitors. The provision is seen as specifically targeting a trio of airlines based in Qatar and the United Arab Emirates: Etihad, Emirates and Qatar Airways.
Delta and its two biggest U.S. competitors, United and American Airlines, have been pressuring the federal government to intervene against the three foreign carriers for several years.
In an increasingly spiteful trans-Atlantic battle. the U.S. carriers say their Persian Gulf counterparts are unfairly subsidized by their oil-rich governments, violating the spirit of international aviation trade pacts that essentially function as free-trade agreements. They and their allies in Congress allege that subsidies totaling more than $40 billion are keeping ticket prices artificially low and giving the three foreign carriers an unfair advantage over private American companies, particularly in the fast-growing Asian, European and Middle Eastern markets.
“Foreign airlines should not receive preferential tax treatment if their countries choose not to open their markets to U.S. companies,” said Isakson, a member of the tax-writing Finance Committee. “Tax reform is all about leveling the playing field for Americans and our businesses,” he added.
Executives from the Persian Gulf airlines have disputed the characterization, saying American companies are also subsidized and that they are trying to bully their way out of a problem.
The provision as authored by Isakson would require foreign airlines to pay U.S. corporate tax rates if their home country doesn’t have an income-tax treaty with the U.S. and American carriers fly there less than twice a week. It’s still unclear whether the language could affect airlines from non-Persian Gulf countries.
The three Persian Gulf carriers currently do not pay U.S. corporate taxes.
Congressional scorekeepers estimate the amendment would force foreign airlines to pay some $200 million in additional taxes over the next decade, money that Senate Republicans are counting on to help pay for corporate and individual tax cuts elsewhere in the bill.
Delta declined to comment, as did the Partnership for Open & Fair Skies, a group set up by U.S. airlines and allied trade organizations to fight the Persian Gulf carriers.
Not all American airline and travel interests are on Delta’s side in this particular fight. The U.S. Travel Association, which represents the travel industry, has said U.S. carriers are trying to quash competition that could help to lower fares and increase consumer choice. And Boeing, which sells its airplanes to Middle Eastern carriers, wants the skirmishes to end.
There is still a long way to go for the language in the Senate bill to become law. The Senate must first pass the bill and the provision must be added to any final House-Senate compromise plan. The language was not included in the House-passed bill.