Duty free lobby to fire statistical salvo

Date: 13/02/1997

THE duty free industry is preparing to bombard the European Commission and EU citizens with facts and figures aimed at winning the sector a reprieve from its July 1999 death sentence.

The European duty free lobby - made up of airports, airlines, ferry companies, drinks and luxury goods manufacturers, all of which stand to lose out if tax-free sales for passengers travelling between EU destinations are abolished - is set to release a stream of statistics in the coming weeks aimed at underlining the threat to jobs and earnings.

The proposed ban will come into force automatically unless member states vote unanimously to overturn a decision taken at the end of 1991 to scrap the system.

Governments agreed then to give the industry a reprieve until July 1999, but have shown little inclination since to extend the deadline.

The Commission is standing by its insistence that duty-free sales are an anomaly within the single market and must disappear.

The industry's high-profile campaign, which will include regional press conferences focusing on different sectors such as at-risk ferry services, is being combined with targeted attempts to create a groundswell of support for duty- free sales among Commissioners and the European Parliament.

It will also attempt to convince EU finance ministers that getting rid of duty-free shopping will not produce a tax windfall for their hard-pressed budgets, as some believe.

“Revenue comes from the duty free industry itself, for example through company taxes,” argues David Zimmer, director of European affairs for the International Duty Free Confederation, the industry's main lobby group.

Zimmer said this week that a series of studies to be published over the next few months would look at this issue of “fiscal balance”.

The lobby group has also written to the Commissioners responsible for transport, tourism and regional policy to draw their attention to the dangers the withdrawal of duty-free allowances would pose for their sectors.

In addition, it is hoping to persuade the European Parliament's economic and monetary affairs, transport and tourism committees to come down in favour of duty free after they have examined the wider implications of abolition.

The lobby is also producing a point-by-point response to Internal Market Commissioner Mario Monti's accusation last July that the current duty free regime was open to widespread fraud and abuse because retailers were not exercising adequate control.

“We are reforming vendor control to guarantee there is no fraud and abuse of the system,” said Alfons Guinier, secretary-general of the European Community Shipowners' Association (ECSA).

The report on the impact of the abolition of duty-free sales on Europe's ferries should be finalised within a month. It is expected to deliver a warning that many ferry routes could close without duty free funds.

“Airports and shipping companies will clearly be the worst hit,” claimed Guinier.

Several airports have been selected to highlight the effect of abolition on their overall earnings, and the threat that airlines will face increased charges to compensate for losses.

The duty free lobby hopes its avalanche of facts will create a snowball effect which will force Union finance ministers to reassess abolition in the second half of this year.

A first attempt to persuade EU governments to change their minds last November failed to make any headway. Even Irish Finance Minister Ruairi Quinn's modest suggestion that the Commission carry out a study of the implications of abolishing duty free was shot down by his colleagues.