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Abolishing German air travel tax would boost economy - PwC study

People stroll along the embankment of the Elbe river in Dresden, December 22, 2014. REUTERS/Hannibal Hanschke
People stroll along the embankment of the Elbe river in Dresden, December 22, 2014. REUTERS/Hannibal Hanschke

FRANKFURT (Reuters) - Abolishing Germany's air passenger tax would boost the country's economy by 67 billion euros (£59.7 billion) in total over the next 12 years, a study by consultancy PwC showed on Monday.

The report, commissioned by aviation lobby group A4E, said that scrapping the tax would make Germany a more attractive travel destination, generating 1.08 billion euros a year via indirect taxes, more than making up for the lost revenues.

Germany introduced an air passenger tax in 2011 to raise about 1 billion euros a year, as part of tens of billions of euros of budget measures amid the global financial crisis.

"Removing all air passenger levies would add more than 24.6 million passengers by 2020, with more than half being tourists," A4E Managing Director Thomas Reynaert said.

That would help create thousands of new jobs and raise Germany's gross domestic product by 3.7 billion euros in 2018. That figure would rise to 6.9 billion a year by 2030, PwC said. German GDP totalled 3.1 trillion euros in 2016.

Germany is one of a number of European countries that charge an air travel tax, including Britain, France and Greece.

Germany's Economy Minister Brigitte Zypries said in an interview in August, after the country's No. 2 airline Air Berlin <AB1.DE> filed for insolvency, that she favoured scrapping the air passenger tax to strengthen the aviation sector.

"We have to create conditions for German airlines under which they can compete," she told German daily Handelsblatt at the time.

Whether the tax is scrapped will depend on the makeup of a new government.

Chancellor Angela Merkel won a narrow general election victory last month and her conservative party will try to build a coalition government with the Free Democrats and Green parties, a process that could take weeks or even months.

(Reporting by Maria Sheahan; Editing by Douglas Busvine and Susan Fenton)