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Brazil Joins France in Air Ticket Tax to Fund Aid (Update2)

By Francois de Beaupuy

Feb. 28 (Bloomberg) -- Brazil plans to join a French-led initiative to finance the fight against AIDS, tuberculosis and malaria in poorer nations by taxing airline tickets.

``My government has taken steps aimed at its permanent and definitive adoption'' of the tax, Brazilian Foreign Minister Celso Amorim said today in Paris at a conference on development aid. Brazil plans to levy $2 per airline passengers departing Brazil, fetching $12 million a year, he said.

French President Jacques Chirac's aid effort, part of Europe's aim of increasing development aid to 0.7 percent of their national income and halving global poverty by 2015, is raising protests from several airlines and business lobbies.

The Paris-based International Chamber of Commerce on Feb. 24 condemned the tax, saying it would cause ``serious economic distortions'' and impose new competitive challenges on a sector already suffering from losses.

European airlines in the International Air Transport Association earned $1.3 billion last year, contrasting with a loss for U.S. airlines of $10 billion, according to the Montreal- based industry group.

`Dangerous' Tax

``It's dangerous to let the governments pick somebody to pay for government issues. That's why we have taxes,'' Deutsche Lufthansa AG Chief Executive Officer Wolfgang Mayrhuber said in Singapore on Feb. 23.

The U.K., France, Italy, Spain, Sweden and Norway also agreed to a facility to finance immunization aid, according to a document released by the French government. Chirac said the U.K.- led International Financing Facility for Immunization will be ``launched'' in the coming weeks.

France will contribute $100 million per year over the next 20 year to the immunization facility, Finance Minister Thierry Breton said in a statement today. The U.K., which plans to spend 1.5 billion pounds $2.6 billion) over three years to fight AIDS, will use part of an already-existing airline tax to fund the drug purchasing facility and the immunization program, the statement said.

France and the U.K. are those saying developed economies will fall short of the so-called ``Millennium Development Goals'' to halve global poverty 2015 if they don't provide about $50 billion in additional help each year. Official Development Assistance amounted to $79.5 billion in 2004, according to the Organization for Economic Cooperation and Development.

French Tax

The French tax, which won't apply to transit passengers staying in France for fewer than 12 hours, will reach 40 euros on first- and business-class tickets for flights outside Europe, and 10 euros per ticket for flights in Europe. For economy-class tickets, the levy will be 4 euros outside Europe and 1 euro within Europe.

Five million people die of AIDS, tuberculosis or malaria each year, France says. About 6.5 million people around the world need treatment for AIDS, and only about 1 million receive the needed treatments. France expects its airline ticket tax, which starts July 1, to bring in 200 million euros annually, providing treatment for 1.3 million people.

Chile is also adopting a $2 charge for flights out the country this year.

The proceeds of taxes will fund an International Drug Purchase Facility to purchase drugs, which would be harbored by an institution such as the World Health Organization or the World Bank.

``I urge other countries to join the Facility,'' United Nations Secretary General Kofi Annan said today. ``I also hope its modalities can be finalized as soon as possible, preferably by the end of May, when the United Nations General Assembly will hold its next High-level Meeting on HIV-AIDS.''

Chirac, Amorim and Annan spoke at the start of a two-day conference attended by almost 100 nations and 17 non-government organizations. The U.S. and 12 other nations are attending as observers.

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net.

Last Updated: February 28, 2006 07:52 EST

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