The of consequences of the abolition of duty-free sales.
EU states adopted duty-free sales in 1991. But they agreed on abolishing the system two years ago based on the need to harmonise tax duties across the EU. The EU Commission plans to ban sales to intra-EU travellers beginning July 1.
The UK, France and Germany say the scrapping of duty-free will mean job losses and higher costs for travellers because the ferry and airline companies will hike up their prices to make up for the loss of income.
Britain said they will be hit twice by the abolition, because of the joblosses and because one of the goods that are sold in duty-free shops is Scotch Whisky.
The EU Tax Commissioner Mario Monti said:
The EU Tax Commissioner Mario Monti has insisted duty-free sales will be abolished in June next year as scheduled, despite calls for them to be retained. He has consistently argued that selling discount cigarettes, alcohol, jewellery and perfumes at travel ports and on boats and planes is not justified in a border-free Europe. He described duty-free arrangements as a "regressive tax" which subsidised drinkers and smokers at the expense of those who abstained.
He also said abolition would free up more than $2.2 billion in tax revenue for job creation in other sectors. Monti said there is no evidence that delaying abolition would save jobs in the airport, airline and ferry sectors, though the report suggested up to 56,000 jobs are under threat.
He even says that sticking to the duty free plan would create some short-term job losses.
Supporters of the abolition of tax-free sales are the Scandinavian countries. Sweden, Denmark and Finland are at the forefront of the campaign to scrap duty-free.
France said it expected to lose 1500 jobs in the sector, while Denmark said it expects a net gain of 400 jobs.
Good or bad consequences?
P&O, the ferry operator, blamed the impact of the abolition of duty-free and weak post- millennium demand for a significant fall in first-quarter profits.
In another article, they say P&O products will be sold at the French rates of tax, which is a lot lower than the British one. There are even advantages for the passengers, namely, the passengers can buy now as much of tobacco ad spirits as they want.
Eurotunnel has reported that 17 percent fewer cars were carried through the Channel Tunnel in the three months to March 31, amid higher fares and the end of duty free allowances last June.
Stena Line, the world’s largest ferryoperator, is relied for 30% of his annual revenues on duty-free sales. They are looking for a way to avoid the new European taxation rule.
Some companies succeeded in finding such a way:
Scandinavian Seaways which operates between Sweden and the UK, has decided to reroute its ferries via a Norwegian port. Norway isn’t a European Union country, so passengers would still be eligible for tax-free products.
Viking line is planning to divert Helsinki-Stockholm traffic via Åland, the Baltic Island that enjoys tax-free status within the EU.
Premiair an airline company, is selling duty-paid alcohol and tobacco products at the lower Spanish and Greek rates of tax.
BAA, who runs the UK’s largest airports, said it would continue to offer shopping at duty free prices, with 90% of all goods staying cheap. Only tobacco products and some brands of spirits.
© Vincent Deley
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