The Minister for Finance, Mr Charlie McCreevy, was in defiant mood after the recent duty free negotiations in Brussels. Paraphrasing a popular American singer he declared: "It isn't over till it's over". Lenny Kravitz would have been proud. Mr McCreevy's remarks came as EU Finance Ministers rejected his attempt to reopen the issue of the abolition of duty free. In the hard fought struggle to reverse an EU decision to abolish intra-EU Duty Free sales a battle had been lost. Only fourteen months remain in which to win the war.
Under legislation agreed by the ECOFIN, or the European economic and Finance Ministers council, in 1992 duty and tax free sales will be abolished on the 30th, June 1999.
The reasoning behind this decision was that duty-free shopping distorted trade by taking the place of duty-paid sales, leading to a reduction in income for the EU exchequer. It will have a major repercussions for all European airport and ferry authorities.
According to those calling for a reversal of this decision, it was made without consideration of the social and economic consequences. In their eyes getting rid of Duty Free will have negative implications for tourism, employment and transport costs.
Duty Free for most travellers by air or sea is part and parcel of any journey. Without the tax on items such as perfume, cosmetics, electrical goods, alcohol and tobacco these products are considerably cheaper. In 1996, intra-EU duty free sales exceeded a massive £115 million here. Sales in duty free products in the EU amounted to 52 per cent of global duty free sales or £4.5 billion in the same year. 71 per cent of this was intra-EU business.
Like Mr McCreevy, supporters of the duty free campaign are unbowed by the latest developments. In Ireland, the national airport authority, Aer Rianta, is part of the International Duty Free Confederation. Duty free retailing is the largest profit source for the company and contributes, they assert, to the maintenance of low airport charges.
A year and a half ago, Mr Ciaran Moore, a senior supervisor in the Dublin Airport duty free shop, set up the Duty Free Action Group (DFAG). The group comprises different departments within the airport. Their aim is to highlight the effects the abolition of intra-EU duty free shopping will have on both the airport and the Irish economy.
This wasn't as easy as Mr Moore had envisaged. "We discovered that finding information about duty free was quite difficult. When we did we started lobbying politicians. We have been in touch with all TD's, met with Taoisigh, Tanaistes and Ministers on the issue," he says. In the early days it became apparent that the politicians were not aware of the main facts surrounding duty free. Since then a number of studies have examined the economic effects of the abolition. One such study carried out by consultants KPMG for the Department of Finance found that 1,100 Irish jobs would be at risk. The report also said that the abolition would result in an increase in airfares of up to £10 per passengers on return journeys within the EU.
Other reports paint a starker picture - 150,000 jobs threatened on an EU-wide basis - and Mr Moore concedes that the full effects won't emerge until duty Free is abolished. A development the DFAG is anxious to prevent.
"Ireland needs duty free to level out the playing pitch. The profit from sales subsidises travel by ferry and air. So because we are an island and do most of our trade and travel by air or sea we will be badly hit if duty free is abolished," he says.
In this context industry will suffer, he claims. The transport costs for Irish businesses importing goods from Europe will be increased. "Raw materials will be more expensive and when the product is re-exported it will cost even more again," he says.
It is 50 years since the first airport duty free shop was established in Shannon Airport operating from a small kiosk in the terminal building. Aer Rianta now operate outlets in Russia, Eastern Europe and China. Duty free is a massively profitable global industry on which thousands depend for their livelihood.
In March, transport commissioner Mr Neil Kinnock said that he doubted there would be a reversal of the controversial decision. It could only be made by a unanimous vote of the EU Finance Ministers who had opted for abolition in 1991.
He explained why Finance Ministers favoured abolition: "Their considered view is that the maintenance of a single market is essential, that the operation of duty free impinges on that and that the withdrawal of duty free would not impinge on the freedom of movement".
Mr Moore does not agree. "The single market has not been delivered fully yet and the harmonisation of taxes is way off. As far as I can see there will be no winners and only losers if the proposals go ahead. "In the coming months we will try to keep the issue alive, this is not the end of the road," he says.
The row has even reached cyberspace where the main duty free campaign has a website. Their hope is that the site will be visited by 100 million European travellers who can be given the facts about duty free. By supporting the campaign they say the public will "keep cheaper travel, save 140,000 jobs, save ferry routes and local airports".
The administrators of the site say they do not seek to oppose European policies: "All that the industry requires is a recognition that keeping duty free does no harm and abolition does no good. It is in this light that the 1991 decision must be reconsidered".
Business 2000 will return in September. We would like to wish our student readers good luck in their exams.
:quality(70)/cloudfront-eu-central-1.images.arcpublishing.com/irishtimes/VR3765MFOBH2NMV2QNICYDF67M.png)