Is a Fee a Tax? The Aussies now know

The Australian Federal Court ruled in court this week that a Fuel Surcharge is not a tax (even though it has been listed in the fare rules as a tax like item). As a result of the ruling - the Australian agents will get a windfall of commissions due during the time the surcharges were first filed.

Whether the ruling is appealed (highly likely) and it makes its way all the way up to the Australian Supreme Court remains to be seen. But we are now seeing that the issue of what is a fare, what is a fee and what is a tax will need to have greater scrutiny.

For the US environment - the USA Internal Revenue Service actually ruled on this last year, declaring that ancillary revenues are not a fare and not a tax. Thus opening up the opportunity for every jurisdiction where an airline product is sold (absent pure airline transportation fares) or delivered to be taxed.

As you can tell the airlines are none too pleased with this ruling. But unbundling the fare into these buckets of fees etc was hardly likely to escape the scrutiny of the lawyers and the tax authorities. Indeed anyone who unbundles their products will be under scrutiny. (er hummm GDSs - are you paying attention here?)

I would caution on too much celebrating by the agents at this point. They will of course have to pay their own tax on this!

Cheers