By Kevin Rozario (London, United Kingdom)
A new report released by airport and travel retail trade associations has outlined the case for allowing arrivals tax- and duty-free sales across the European Union. At a time when almost 200 European airports face insolvency due to 1.29 billion lost passengers this year to September, the associations argue that a proactive move to increase revenue in other ways makes sense.
Based on 2019 traffic figures, analysis from York Aviation says that tax- and duty-free arrival shops would have generated around €4.3 billion ($5 billion) in Gross Value Added (GVA), supported 41,500 jobs, and provided €1.6 billion ($1.9 billion) in tax revenues.
The report was commissioned by the European Travel Retail Confederation and released in conjunction with airports association Airports Council International Europe. Both bodies hope the findings will convince the EU to legislate to allow passengers to shop at both ends of their journey, not just on departure, something first suggested in July.
Aviation bodies such as IATA and ACI have been crying out for government financial aid due to the severity of the COVID19 pandemic, as well as a harmonized testing regime, rather than quarantine. By finding new revenue streams themselves, airports and their retail partners could get a more favourable response from Brussels.
Pockets of EU “not bottomless”
In a webinar presentation of the new report, ETRC president Nigel Keal admitted: “The pockets of governments across the EU are not bottomless and we have to find cost-free ways to support the aviation system and maintain jobs.”
ETRC and ACI want to make arrivals tax- and duty-free shopping a key element of any recovery plan. They are calling on the EU to review current legislation to allow passengers travelling from third countries to be able to shop on arrival at member states’ airports.
York Aviation says that arrivals shopping could make up as much as 30% of total travel retail sales at EU airports if it was allowed. With the U.K. also considered a third country from 1 January 2021—and also the biggest aviation market in Europe—the numbers of non-EU passengers will see a dramatic increase from that date.
But the U.K. stands to lose out. British government plans to remove tax refunds to international visitors next year are already expected to be detrimental to Treasury coffers as Chinese and other high spenders decide to shop tax-free in other parts of Europe instead. If EU arrivals duty-free shopping gets a green light this would encourage travelers leaving Britain to shop at their destination airport rather than the departure gateway. What the U.K. loses the EU will gain.
Considering all markets, Keal says: “As allowances will remain the same, this proposal will simply give passengers another opportunity to avail of their tax- and duty-free allowance and to choose to support their local airport rather than buy abroad.”
York Aviation says that—adjusting for Covid-19 effects and Brexit—arrivals shopping would generate €3.5 billion in GVA, support 33,700 jobs and bring in €1.3 billion in annual tax revenues by 2024 across the EU as a whole.
A Proven Concept
Arrivals duty-free shopping is common in many airports around the world, including Norway, Iceland, Switzerland, and Turkey, and further afield in the Middle East and Australia and New Zealand. “It’s a proven business model,” said Keal who described the EU’s current approach of only allowing duty-free sales to passengers departing its borders as “outdated.”
With EU airports facing “the most difficult trading conditions in modern history” according to ACI Europe director general Olivier Jankovec, he also favours a change to the legislation. He commented: “EU airports are losing hundreds of millions of euros of potential commercial income to their non-EU counterparts each year. Arrivals tax- and duty-free will allow retail sales to be displaced from third countries back to the EU arrival airport.”
ETRC is already in discussions with the European Commission and individual governments about the legislation change it wants. Secretary general Julie Lassaigne said: “For now we can’t talk about an expected time-frame, but considering the need to drive new revenue streams, plus the perspective of the U.K. leaving the EU soon, we hope that EU member states will understand the need to open up this opportunity in the very near future.”