TaxPersonal TaxView from the House – Stuart Bell

View from the House - Stuart Bell

On the day the entire European Commission resigned, the Council of Finance Ministers prudently back-heeled any question of a reprieve of so-called duty-free sales to a committee of Union ambassadors.

The date of 1 July 1999 for the expiry of duty-free sales may not be cast in concrete, but the last-minute proposals of Britain, France, Spain, Greece and Ireland to extend the grace period appear doomed.

During the course of negotiations to create the single market by 1 January 1993, the European Council agreed a request from the then British government that intra-EU duty-free sales should continue until midnight 30 June 1999.

After this date, duty-free sales will only be allowed to passengers travelling beyond the European Union countries.

The six-year extension was to allow the duty-free industry to adjust to the new circumstances ‘to deal with both the social repercussions and the regional difficulties’.

The industry took a different route, however, investing in more sales outlets and extending the range of goods on offer, making it difficult to apply a decision already taken six years ago.

The former government might have linked the abolition of duty-free sales of alcoholic products to the harmonisation of excise duties within the Union.

This is underlined by the fact that three member states – Denmark, Sweden and Norway – are permitted to block the free movement of duty-paid spirits at least until the end of 2003.

This might have opened the argument of tax harmonisation, but helped the Scotch whisky industry, which counts EU duty-free business as its sixth biggest export market – worth around #100m a year in retail value.

The proposal, however, to exempt sales from excise duties until the end of 2001 but subject them to value-added tax prolongs the agony, and hardly smacks of firm decision-making to create the single market.

It may be a long and arduous trail to reduce excise duties in other member states within the purview of a single market, but the trail will not begin until the duty-free lobby accepts the inevitable abolition on 1 July and plans accordingly.

Stuart Bell is Labour MP for Middlesbrough and adviser to Ernst & Young.

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