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Friday, June 4, 1999 Published at 13:21 GMT 14:21 UK

Business: The Company File

Europe's duty-free sales are dead

Britain is calling for a reprieve for duty-free sales

European leaders have confirmed their decision to abolish duty-free sales within the European Union.

Duty free retailers had hoped that politicians at the EU summit in Cologne would have a last-minute change of heart.

Three countries, Germany, Britain, and France had sought to overturn the decision on the duty free sales. According to UK Prime Minister Tony Blair they managed to assemble a majority in favour of duty free sales, but not large enough to overturn the ban.

The changes

These are the changes, taking effect on 30 June.

  • The sale of duty-free alcohol, cigarettes and other consumer goods on airports and at sea will end for all travel within the European Union.
  • Goods sold at airport shops and on ferries will be subject to the VAT and excise duties of the country where the journey starts.
  • Purchases for consumption on board ferries and planes remain duty-free.
  • Passengers will still be allowed to purchase duty free goods on journeys to destinations outside the EU.

The law's long journey

[ image: There are fears that 100,000 jobs will disappear if duty free is axed]
There are fears that 100,000 jobs will disappear if duty free is axed
The move comes nine years after European ministers agreed to scrap the popular holiday perk - and despite years of lobbying by the duty-free industry to keep the £4.3bn-a-year trade alive.

The abolition of duty-free was originally agreed in 1991 on the grounds that cut-price sales to cross-border travellers within the EU was an anomaly in a single market.

The original end date was 1 January 1993, but the duty-free industry was granted an extra six and a half years to adjust.

But as the deadline loomed the sector concentrated its efforts instead on reversing the decision, which would require a unanimous vote of EU member states.

Job fears

The duty-free lobby estimates that up to 100,000 jobs will be lost at ports and airports and amongst airline and ferry staff - with 30,000 jobs at risk in the UK alone.

A spokeswoman for Luton airport in Bedfordshire called the decision "a major blow", arguing that 11% of the airport's total income came from duty-free.

"This is likely to lead to higher costs for travel and it could hit jobs in the travel industry", she added.

British Airways warned the abolition could translate into increased landing charges for airlines by about 15%.

However, a spokeswoman said that "fortunately, we won't be too badly affected as most of our duty-free sales are made on long-haul flights rather than on the shorter European ones which are subject to the ban."

[ image: Cheap duty-free booze cruises are popular with daytrippers]
Cheap duty-free booze cruises are popular with daytrippers
But the Brussels Commission insists that the figures are scaremongering, and that transit shopping is here to stay, with airport shops thriving even if they do not offer cut-price goods.

Earlier this year a Commission study rejected claims of massive job losses, but Brussels offered EU cash compensation in areas hit by the end of duty-free sales.

Acting Commission President Jacques Santer said this week that not one member state had applied for help - reinforcing the belief that there was no economic disaster looming when the trade ends.

Earlier this year, UK Foreign Secretary Robin Cook had said that the duty-free issue was probably the most important item on the EU agenda as far as ordinary citizens were concerned.

But a handful of member states, led by the Danes, were adamant that duty-free sales are illogical in the single European market.

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