Smoke, drink, and be merry for next year duty-free shopping dies, at least within the European Union. Spray, too, for travellers and holidaymakers within the15 EU member states will also have to pay these countries' individual excise and tax rates on perfume as well as the many other goods currently duty free. The looming abolition of tax and duty-free sales might surprise many but the European Commission originally planned to phase them out from 1993. Member states voted for a delay until July 1999, however. The duty-free industry has had plenty of time to prepare for the change but has opted instead to spend a fortune lobbying against any change at all. Certainly, the stakes are high. Duty-free sales are worth about #4600m a year within Europe. According to industry lobbyists, duty free employs 140,000 people in the EU, one-third of whose jobs, they claim, could be lost because of abolition.
EU finance ministers yesterday recognised the threat to jobs, but not in sufficient numbers or with sufficient conviction to endorse a Europe-wide study of the potential impact on employment. It is the lobbyist's duty to exaggerate on the client's behalf and we detect a certain scaremongering as far as the warnings of job losses are concerned. It is worth emphasising that, while abolition is likely to have a particularly adverse effect on ferries sailing between EU states and the smaller airlines and regional airports, duty-free shops will not disappear. They will still be available for travellers flying into, or out of, the EU and there will surely be opportunities to expand this side of the business. In truth, the commission had no alternative but to scrap duty free. It is a glaring anomaly in the single market. In a Europe without frontiers it is illogical that there is no duty free for
the traveller going from Glasgow to London, for instance, yet there is if he goes to Paris, as long as he flies or takes a ferry (since it is unavailable on Europe-wide trains or buses).
Abolition is also in line with the single-market strategy to preclude different excise and tax rates, although the duty-free industry rightly points out that harmony of VAT and other duties is a long way off. Spirits, cigarettes, and wine can be bought more cheaply in the visiting country's supermarkets, for instance, than in duty-free shops. So duty free can be a bit of a con, even if its earnings help keep costs down, in airports for instance. But they will continue to have a captive audience after abolition and it will be their challenge to extend alternatives to duty free. The finance ministers' meeting was chaired by the Chancellor, who spoke piously of his vision of a Europe which kept prices down, thereby alleviating the impact of the loss of duty free. The Scottish whisky industry's products will be among those affected by the loss of a significant sales opportunity. It will have
to lobby harder for a fairer duty and excise system. And Mr Brown should remember that there will be little scope for giving the European customer a better deal when the Treasury takes about #8 in duty on each litre of spirits sold.
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