EU Clears France To Defer Airline Tax Payments Amid Virus

By Joseph Boris
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Law360 (March 31, 2020, 8:35 PM EDT) -- The European Union's executive arm approved on Tuesday a French scheme to defer payments by airlines of certain aeronautical taxes, saying the plan to counter damage caused by the coronavirus pandemic comports with EU rules on state aid.

A day after giving France the go-ahead on a €1.2 billion ($1.32 billion) plan to help small businesses weather the pandemic, the European Commission endorsed the government's plan to compensate airlines for pandemic-induced damage by temporarily easing pressure on their cash flows.

"This is the first state aid measure notified to us by a member state aiming to mitigate damages to the airline sector," EU Competition Commissioner Margrethe Vestager said in a statement.

She said the commission, together with the bloc's member states, was working to ensure that any national measures to help businesses tackle the pandemic "can be put in place as quickly and effectively as possible, in line with EU rules."

France had told the commission of its plan to set up a deferral payment scheme for certain aeronautical taxes to compensate damages suffered by airlines due to the coronavirus outbreak, the statement said.

The scheme will be accessible to airlines with an operating license in France and will allow them to defer payment of certain taxes that would in principle be due between March and December 2020 until after Jan. 1, 2021, and to pay the taxes over a period of up to 24 months.

According to its statement, the commission assessed the French measure under Article 107(2)(b) of the EU's 1958 founding treaty, which authorizes the body to approve state aid measures granted by a member country to compensate specific companies or industries for damage directly caused by exceptional occurrences.

The commission said the coronavirus outbreak qualifies as an exceptional occurrence, "as it is an extraordinary, unforeseeable event having a significant economic impact," the statement said. As a result, exceptional interventions by EU members to compensate for economic damage linked to the outbreak are justified.

Normally, EU countries are barred from giving specific businesses or sectors an advantage, such as a tax break or subsidy, unless the measure's competition-distorting effect is outweighed by potential economic development.

A French government representative couldn't be reached for comment on the commission's decision.

As of Tuesday, French health authorities had reported 52,375 confirmed cases, including 3,523 deaths, of COVID-19, the respiratory disease caused by the novel coronavirus.

--Editing by Tim Ruel.

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