The document summarizes a meeting agenda on industry taxes and network economics. The agenda includes spotlight sessions on tax governance and collaboration, implementing industry solutions, and a tax settlement perspective from airlines. It also discusses the complexity of managing taxes throughout the ticket lifecycle and between different stakeholders. Network economics and industry collaboration are presented as ways to help address tax challenges through standards, data sharing, and learning from each other.

1. David Smith – ATPCO
Henry Coles – IATA
Tony Hemsley – Sabre
Jérôme Boyer – Air France KLM

2. Today’s Agenda
• Industry Taxes and Network Economics
• Spotlight Sessions:
• Tax governance and collaboration
• Implementing industry solutions for a global system provider
• Tax settlement – an airline revenue accounting perspective
• Panel discussion
• Audience questions
• Summary and Key Points

3. The Business Problem
Taxes are a cost-driven revenue-neutral activity, made
all the more complex by
• Third party collection and settlement
• Remittance based on sale and use
• Interline billing between seller and operator
• Taxes on ancillaries and other ‘non-fares’
• Penalties for under-remittance
• Bad publicity for over-collection
• Difficult to process for refund and reissue
The cost of managing tax through the
life cycle, and related write-offs, runs
into the millions of dollars per year
“…in this world nothing can be said to
be certain, except death and taxes”
B. Franklin, 1789

4. Why Network Economics is the Answer
Standards
Data
Community
Learning
Collaboration
Engagement
Content
Connect
Calculate
Network economics is a product of the network effect,
whereby the value of a good or service increases as the
number of buyers or subscribers multiplies.

5. Where Are We?
• Data available in text
format from IATA
TTBS and PDF
• ATPCO offers PFC
only in data form
• Launch of ATPCO Tax Collection & Distribution
• Capture of IATA TTBS in data format with accompanying data
application
• Data Application to support the distributed content
• First pricing system fully implements
• All major pricing systems
implementing
• Revenue Accounting Tax
Database, powered by
ATPCO, launched
• Tax calculation pilot
• First revenue accounting subscriber
• Design and build of Revenue
Accounting Tax Database
• Fare Management adoption
• Growth in subscription and testing
Pre-2010 2010 2011 20162015
• Carrier-specified amounts incorporated
• First major pricing system implements
taxes on ancillaries
• All major pricing systems testing
• IATA/ATPCO Complex Taxes project
2017
• Multiple pricing systems
implement taxes on
ancillaries
• Significant volume testing
to remove inconsistencies
in itinerary taxation

6. Taxes into the Future
- Emerging distribution; what’s the impact on tax pricing?
- Industry utilities; bettering collaboration to ‘raise all boats’
- Is complexity increasing or reducing over time?
- The financial impact of getting it wrong
- Airline tax liability; the required level of effort
Spotlight Sessions:
• Tax governance and collaboration
• Implementing industry solutions for a global system provider
• Tax settlement – an airline revenue accounting perspective

8. What Role does IATA Play?
• The big picture
• Advocacy
• Standards
• TTBS and RATD

9. Advocacy
• Bad taxation impacts everyone
• Airlines, the easy target
• What’s on the radar?
• Get involved

10. Standards
• Why do we have standards?
• The ghost of the paper ticket
• When is a tax issue a distribution issue
• Get involved

11. Innovating Together
• RATD
• Complex Tax Project
• A fresh look?
• Win-win-win-win

13. A typical week in the life of the Sabre system before ATPCO tax
A single source of data requires all parties to remain diligent as one-to-one conversations shift to the one-to-all
distribution channel.
With over 400 airlines and a global business, a typical week clearly reflects the enormous relevance of
accuracy and consistency for all players in the distribution chain:
✓Over 650 tax codes and nearly 200 point of sale countries
✓Over $300M collected in taxes (agency tickets averaging $106.00 in TFCs)
✓36 Taxes updated (350 tax sequences updated)
✓Management of 2300 Carrier Tax Code Exceptions (over 30,000 sequences)
❖ Additionally a typical 3-4 new ways of calculating tax are introduced each year requiring more
significant development changes by system providers (and now to the data application)

14. Air ticket taxes are not the whole story…
Moving to a one-to-all distribution model requires explicit instruction for all taxable products.
With a data-driven application, system providers are less likely to identify shortfalls:
✓Tax Refundability: essential for machine processed refund and category33
✓Tax on Fee: commonly different to Air Ticket Tax regulations
✓Outside of the Fare: ancillaries, baggage, carrier imposed fees, ticketing fees, tax on tax

15. Lessons Learned
The effort across IATA, ATPCO, airlines and system providers is a tribute to the results we can
achieve
Difficulties we overcame provide important learning on challenges to eliminate moving forward:
✓Your host pricing system: an intimate relationship resulting in a better accuracy
✓Carrier exceptions: varied between system providers, and redundant exceptions
✓Circumventing the new process: will cause inconsistency and dilute accuracy
Together we will establish permanent improvements to accuracy, consistency and time-to-
market if we are diligent and follow the process

17. 17
At today’s rates, itinerary tax is around 20% of the fare
collected
This is a high financial impact, and so is very important to get it
right
Airlines are acting as tax collectors, so they are supposed to
collect and pay in a neutral way - without profits or losses

18. 18
➢ There are multiple stakeholders
and multiple sources
➢ These can all be affected by
➢ lack of automation
➢ manual interventions
➢ exceptions
Distribution
RA toolInterline Partners Authorities

20. Topics for discussion
1. Increasing complexity of taxes, and industry cooperation and
collaboration to address it
2. New Distribution Capability impact on taxes
3. Governments and authorities taxing unbundled products
4. Financial issues caused by non-alignment
5. Airline and community engagement