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Wednesday, June 30, 1999 Published at 15:27 GMT 16:27 UK

Business: The Economy

'Passengers foot bill' for duty-free axe

Airports plough duty-free profits into improvements

Scottish airline passengers could end up footing the bill after the abolition of duty-free shopping, according to an airports chief.

Vernon Murphy, Managing Director of Scottish Airports Ltd, said his company would endeavour to keep prices down, despite the European Union decision to end the tax break.

Scottish Airports Ltd boss Vernon Murphy discusses passengers' reaction
But Mr Murphy said duty-free profits were ploughed back into airport improvements and any shortfall may have to be met by increased passenger costs.

Mr Murphy, who is head of the company responsible for managing Glasgow, Edinburgh and Aberdeen airports, said it would try to keep prices down to maintain the same levels of trade.

He said: "What we are going to have to do is keep the volume going through our shops because jobs will go.

[ image: Flights to many destinations are affected]
Flights to many destinations are affected
"We are trying a whole range of initiatives and on certain goods, that is tax free goods in particular, we will absorb the tax. People travelling to Europe will be able to buy at the same price."

But he stressed that any drop in prices could lead to increased travel charges for customers.

"Scottish Airports alone, last year and this year, was spending £100 million for improvements for passengers. If we don't get that money from duty free, we've got to put up our charges.

"We'll be doing these experiments and talking to our airlines next month to discover how well they've gone and how much we need to recover in increased charges."

Mr Murphy joined the Scotch Whisky Association in attacking the decision to end duty-free before the Europe-wide introduction of the single market.

'Very big market'

He said: "We're not saying we won't survive without duty free. What we are saying is we have a very big market which enjoys buying duty-free.

"We are nowhere near tax harmonisation in the European market, why take it away, people enjoy it.

[ image: Whisky industry wants single market]
Whisky industry wants single market
The whisky industry has warned the decision will cost jobs and sales in the short term and has vowed to press politicians to speed up progress towards a European single market.

Spokesman Campbell Evans said the decision to abolish duty-free within Europe in 1991 was taken with a single market in mind.

But he added: "We have a situation now where we have nothing approaching a single market. There are 15 member states with different tax rates which discriminate against Scotch whisky.

"The tax rate is higher for whisky than beer and wine. If you go into a bar and drink a glass of scotch, you will pay 27p tax, but only 18p for a glass of wine. even though it has the same amount of alcohol in it.

"As we make whisky and import wine, that seems crazy."

'Wrong example'

Mr Evans said the abolition of duty-free was "setting the wrong example" to countries outside the European Union and the rest of the world.

He said: "We will press the Government and the Scottish Parliament as an advocate, hopefully, for us. We will tell the Government: 'you fought for duty-free - now we need a single market and let us press ahead with it'.

"It is not going to be easy in the short term. What we lay today won't be drunk for years to come but we would like steps to be taken.

"There will be some lost sales but we must look positively and not give up on this," he added.

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