DUTY-FREE: A VICTIM OF SINGLE EURO MARKET;MARKETERS CRY FOUL IN MOVE TO LIMIT SALES

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[brussels] The European Commission has rung the last bell for duty-free sales to travelers between destinations in Europe, claiming that these Value Added Tax-free treats are inconsistent with the single European market.

The decision to revoke duty-free sales between countries has provoked an outcry from airlines, airports and ferry operators, as well as from tobacco, spirits and luxury goods marketers, who are intensifying their lobbying efforts.

WILL HURT $6 BILLION INDUSTRY

Opponents argue that such a move, planned to take effect June 30, 1999, would destroy a healthy $6 billion industry and force more than 100,000 people out of work. The rule will not shut duty-free shops, however only travelers heading for places outside Europe will be able to make purchases.

According to a recent survey of duty-free sales by the European Travel Research Foundation, each year the rule will cost the wine and spirits industry $1 billion in sales; tobacco manufacturers, $800 million; and the luxury goods, fragran ces and cosmetics businesses, $2.1 billion.

"We are far from happy about this decision," said Roger Morriss, international sales manager for luxury lighter manufacturer Colibri and representative for luxury goods companies in the Duty Free Confederation. About a quarter of all lu xury goods sales in Europe are generated at duty-free outlets.

"Europe's duty-free market is the biggest in the world for all suppliers," said Andy Williams, sales manager for British-based tobacco manufacturer Gallaher. More than 70% of global duty-free sales of tobacco products come from Europe, according to Gallaher. And 52% of all duty-free sales comes from the European Union.

WAYS TO RECOUP LOSSES

Consumers also will lose out, argues Elain Booth, head of duty-free operations for the British Airport Authority. "Travelers would not only lose the chance to buy cheaper treats, but they would suffer from higher prices of air and ferry fares," she argues.

"We would have to increase landing charges to airlines in order to cover the loss in income, and that would most probably bump up the price of tickets," she said.

"It is hard to find anyone that would actually benefit from the end of intra-Europe duty free," said Barry Godard, head of the Duty Free Confederation.

So why is the European Commission doing this? In short, duty-free does not fit with the concept of one internal European market.

But the confederation's Mr. Godard retorts: "There is no internal market yet. We still have 15 tax systems and 15 legal systems. When there is a United States of Europe and tax revenues are channeled through Brussels, then that's a diffe rent matter."

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