Leasing flightcrew, or employing them on short contracts, is not a new phenomenon, but it is growing globally. In Europe, there has been recent controversy over the practice for a variety of reasons, just one being the unresolved question as to whether this is simply a smart way to avoid paying taxes or social security levies, especially for low-cost, short-haul carriers such as EasyJet or Ryanair, which have bases and employees in many different European states.

The variety of applicable national laws and competing jurisdictions has led to claims by states such as Italy and Germany of tax avoidance by airlines and individual pilots. It has also raised the risk that some pilots may be targeted for income tax both by the state in which their airline is headquartered and the state in which their operational base is situated.

In the recent Ryanair tax controversy, Italian authorities did not like the fact that contracted pilots at the airline's Italian bases were paying no tax or social security in the country, and demanded they pay up. This prompted a characteristically defiant reaction from Ryanair, which claimed the airline and its employees comply completely with their obligations: "All Ryanair pilots and cabin crew operate on Irish-registered aircraft and fully comply with EU tax payments and rules. They are paid in Ireland, and pay their taxes and social taxes in Ireland."

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Source: Flight International