Ministers reject duty-free study

Date: 14/11/1996

By Simon Coss

A BID by Ireland to save duty-free shopping throughout the European Union was shot down by finance ministers this week.

Irish Finance Minister Ruairi Quinn suggested to his colleagues at their regular monthly meeting that they commission a study into the economic impact of the abolition of duty-free shopping - due to come into effect on 1 July 1999.

But the idea met with a lukewarm response from many member states - notably the UK, Germany, Denmark, Sweden and Finland - all of whom felt it would send the wrong signal to European citizens.

“Several ministers felt that such a study would give the impression that there may be a change of policy over scrapping duty-free sales. That is certainly not going to happen,” said one EU finance official.

“There will be no study,” said another.

It is also understood that many ministers felt that commissioning a study 'just for the sake of it', when there appeared to be no question of a policy change, was a waste of time and resources.

Airports in the EU would be particularly hard hit by the abolition of tax-free shopping, with Airports Council International (ACI) claiming that abolishing the system would lead to higher ticket prices, increased landing fees for airlines and restrictions on charter travel.

The group reacted angrily to this week's news and vowed to keep up the pressure for a change in the deadline.

An ACI representative said it would be unacceptable for duty-free shopping to be abolished without a proper study of the consequences and insisted the European Commission ought to start working on such a report as soon as possible.

Any decision to reverse the abolition of duty-free sales would have to be taken at least a year before the July 1999 deadline, and then only if the Commission came forward with a specific proposal. As things stand, a last-minute change of heart appears unlikely, with Internal Market Commissioner Mario Monti insisting duty-free sales are incompatible with a border-free Europe.

But those campaigning for a stay of execution have not given up hope. “We have about one-and-a-half years to get a study accepted,” said the ACI spokesman.

Ireland, current holder of the EU presidency, is more susceptible than most to pressure from the airports lobby. Its state-owned Air Rianta, which controls Dublin, Shannon and Cork airports, derives some 40&percent; of its annual sales revenue from tax-free business.

In 1995, the firm's commercial operations accounted for some 27 million ecu, while only 16 million ecu came from straight aviation-related business.

Irish Fianna Fáil MEP Brian Crowley has been fighting for years to get the 1999 deadline changed.

The cross-channel ferry industry, still reeling from the huge loss in trade which followed the opening of the Channel Tunnel, is equally adamant that duty-free goods should stay. Ferry companies are pressing hard for a postponement of the cut-off date and feel they have a good case.

“We still believe there will be an extension put forward before 1999. We are lobbying hard and our voice seems to be being heard. We have always argued that duty-free sales should only be abolished when EU tax regimes are harmonised. As there is no sign of that happening in the near future, we see no need for the scheme to be abolished,” said a spokesman for P&O European Ferries.

The company does admit, however, that it is making contingency plans in case its efforts do not pay off. It is gradually converting its ships into what have been described as a fleet of 'floating shopping malls' selling an ever-increasing variety of non-duty-free items.

Duty-free sales account for up to one-third of annual investment for some retail companies. Tax-free shopping generates over 5 billion ecu in revenue and nearly 140,000 jobs depend on the sector.