UK offers pro-duty free lobby little cheer

Date: 11/12/1997

By Chris Johnstone

ATTEMPTS to save duty-free sales in the EU from abolition are running out of time, with the forthcoming UK presidency offering little firm hope of salvation for the multi-billion-ecu industry.

British officials say the UK government has no plans to raise the issue during its six months in charge of EU business, despite calls for a further stay of execution or a reversal of the 1991 decision to abolish duty-free sales within the Union from the middle of 1999. “The general feeling is that it will be abolished then,” said one.

Time will be called on duty-free sales in June 1999 unless EU ministers unanimously agree to reconsider their decision.

The pro-duty free lobby - made up of spirits, luxury goods and perfume manufacturers, airports, airlines and ferry companies - is warning of heavy job losses and sharp increases in fares if abolition goes ahead.

In the absence of UK support, the industry is casting around for another country to push the subject up the Union agenda or for some other development which might reignite the debate over the next six months. There are hopes that the European Parliament could provide the necessary catalyst by turning past calls for a study into the effects of abolition into a concrete demand for more research.

“The UK presidency is a critical time. If no decisions are taken during this time, we will be in a desperate end-game,” said a spokesman for one big company which relies on duty free for a considerable part of its sales. “There is a feeling that there is a broad ground swell of support for duty free, but that has to translate into something definite,” he added.

Bonn's stance could prove crucial. Support for a fresh look at the issue has been growing in Germany's lower and upper houses of parliament, but it is still unclear whether that has influenced the government.

Ireland, Spain, Greece and Finland are said to be sympathetic to calls for a rethink, but none has yet called for further discussion of the issue in the Council of Ministers.

Certain key issues will have to be resolved next year even if ministers refuse to reconsider their decision, such as what levels of value added tax and excise duties will be charged on sales of former duty-free goods on board ferries and aircraft.

“Even on the simplest of trips, between the UK and France, a decision must be taken on which country's rates apply at what stages of the journey,” said an industry spokesman.

The European Commission has long insisted that there can be no revision of the decision to abolish duty free within the EU, arguing that it is an anomaly in the single market.