National Policy Interests in the Duty-Free Market

Abstract: In 1999 the EU abolished duty-free on intra-EU travel. Other European countries and many countries outside Europe still retain duty-free shopping for international travellers, as does the EU in relation to external travel. This paper looks at national policy interests in the retention, or further abolition, of duty-free. We note that these will relate closely to the structure of competition in the duty-free market, and to the tax levels on high-street sales in different countries. The existence of duty-free trade requires that countries have reasons both to admit duty-free goods and to permit their sale to departing passengers. We argue that low-tax countries might be more likely to perceive gains from unilateral abolition of duty-free sales to departing passengers, while high-tax countries would only benefit from concerted action to abolish duty-free.