Washington Wire - 1997-01-13
<B>Call For Tax Extension</B>
Transportation Secretary (soon to be Energy Secretary) Federico Peña has issued a call for the new Congress to promptly pass a short-term extension of the now-expired aviation excise taxes. He also urged members of Congress to work with the aviation industry to develop a long-term financing solution to fund the Federal Aviation Administration, which now relies heavily on the excise tax system.
"Without renewal of the taxes, FAA funding for airport development and safety and security programs will be threatened," Peña said. "It is estimated that the uncommitted balance in the trust fund will be completely exhausted by July 1997 if there is no extension."
<B>DOT Approves Liability Ceiling</B>
The Department of Transportation has cleared a global airline agreement waiving the ceiling on liability claims for injury or death on international flights from the United States. DOT had approved it on a tentative basis last month, but wanted airlines departing the States to assume liability for the entire trip even if they used code-sharing partners, and to allow U.S. passengers to sue foreign carriers in U.S. courts instead of overseas. The final agreement does not include those conditions.
Previously, travelers were bound by the Warsaw Convention, which set $75,000 as the limit on damage claims, unless the victims of an aviation accident or their families could prove the carrier to be guilty of "willful misconduct." Efforts to raise that limit have been unsuccessful.
<B>Germany Reinstates VAT Refunds</B>
The U.S. and German governments have sidestepped a potentially expensive tax situation for American companies by agreeing that U.S. firms will continue to be eligible to receive refunds of the 15 percent VAT taxes paid for business conducted in Germany.
In the summer of 1995, the German government refused VAT refunds to any country that did not make refunds on a reciprocal basis. Because the U.S. levies no VAT, German officials considered calling the U.S. sales tax system a form of VAT and disallowing refunds of its own VAT. "We are greatly impressed by the quick reaction and dedication by our government to reserve the intended changes in German VAT law that would affect U.S. corporations," said Britta Eriksson, president of Euro VAT Refund, a Culver City, Calif., firm that helps corporations apply for and collect refunds.
Eriksson estimated the potential annual savings to U.S. corporations through German VAT refunds as between $300 million and $500 million. Recoverable VAT categories typically include hotels, meals, car rental and gasoline, and trade shows and conferences.
<B>GSA Awards Contracts</B>
The General Services Administration issued its biggest-ever round of contract air fare awards, granting 18 airlines awards for $1.56 billion worth of business over the next year.
Government travelers are mandated to use the contract carriers for official travel, which makes bidding for the contracts highly competitive. The government estimates it will receive an average 62 percent discount for the 6,147 domestic and international routes covered under the contracts. During the last fiscal year, the contract program covered only 5,115 city pairs. Top winners were Delta with 1,410 routes worth an estimated $367.3 million, USAir with 975 routes worth $230.4 million, United with 934 routes worth $238.5 million, Northwest with 856 routes worth $222.7 million and American with 796 routes worth $230.5 million.