Dáil Éireann debate -
Thursday, 20 Mar 1997

Vol. 476 No. 6

Adjournment Debate. - Duty Free Facilities.

Mr. S. Ryan

I thank the Ceann Comhairle for affording me the opportunity to raise this national and international issue of duty free facilities which have developed over the past 50 years into a major international industry. Europe alone accounts for over 50 per cent of all duty and tax free sales worldwide, its total value in Europe being well in excess of £4 billion per annum.

Given that practically 20 million people are at present unemployed within the European Union, if the European Union Commission holds to its present decision to end duty free facilities, the loss of this business post-1999 will be devastating. It is anticipated that 440,000 people at present employed on duty free activities could become unemployed in Europe. Included in that figure are some 300 permanent employees at Dublin Airport apart from the 200 school leavers and unemployed recruited during the summer period.

Aside from the knock-on effects on those working for small companies, who retail principally in the duty free market, transport companies, airport and ferryport staff will be affected. All these activities are vital to local communities.

I predict that the decision to abolish duty free sales will lead to increased travel costs for air and ferry passengers, as transport companies seek recompense for profits lost in the duty free sector. In Dublin Airport alone, Aer Rianta will incur a staggering revenue loss of approximately £60 million annually.

Another aspect of this issue is that passengers vote in favour of duty free products every time they travel. This is undoubtedly one case where the interests of producers and consumers coincide. Should both groups not have a legitimate say in what occurs? I believe they should.

Another factor to which I might refer briefly is the potential threat to regional airports and tourism in rural areas. It has been represented to me that the duty free industry breaches EU directives and regulations and compromises competition. Given that it applies satisfactorily all over Europe and throughout the world I do not see the benefit of withdrawing a service which is popular worldwide. It is European bureaucracy gone mad. I am aware the Government and the Minister for Finance, in particular, do not need to be convinced by my argument. While the problem lies with other EU Ministers and Commissioners, the Minister, Deputy Quinn, made a case for Ireland on the issue at the ECOFIN Council in November. Given the implications for jobs in Ireland, particularly in my constituency, it is vital that the International Duty Free Association, which incorporates the organisation in Ireland, lobbies hard to secure a general change of attitude at EU level.

Our MEPs, who are aware of the situation, should come together and do their utmost to bring the merits of the case before the European Parliament and directly to their parliamentary colleagues. The discontinuation of the facility will have major implications for jobs and business here. I do not see any reason the Commission should take a decision to end duty free facilities in 1999 thus putting more people in the dole queues.

Minister of State at the Department of Finance (Mr. Coveney)

I thank Deputy Ryan for again raising this issue. This matter was debated here on 2 October 1996 and parliamentary questions on the matter have been answered by my colleague, the Minister for Finance.

There is no proposal to terminate duty free or tax free sales for travellers to non-EU destinations in 1999. This portion of the business will remain. For certain airports, particularly Shannon airport, the non-EU traveller is a most important source of revenue. The other State airports also handle traffic to and from non-EU locations.

As regards EU travellers, the European Union has decided as part of the package of Single Market measures adopted in 1992 to allow the continuation of duty free and tax free sales for intracommunity travellers until 30 June 1999.

This was agreed as part of a comprehensive series of Single Market tax measures, including substantial changes to the entitlements of travellers to bring in tax paid goods more freely. From 1 January 1993, travellers from EU countries benefited from enhanced entitlements to import items tax paid from other EU states and easier border controls.

This continuation to end in June 1999, set out in two directives, was agreed to allow the duty free operators, including Aer Rianta, the airlines and the shipping operators time to diversify their activities. It had been originally planned that duty and tax free sales would end in January 1993 for EU travellers and the duty free operators were well aware of this intention for many years before that. The extension to 1999 was in response to requests for more time to adapt and was reluctantly agreed to by the Commission on the basis of an entirely new system of vendor control of duty free sales and with the legal position being that EU duty free would end in 1999. This new system of vendor control was to be subject to review by the Commission as it was a substantial change from the previous arrangements.

The decision to end duty free sales in 1999 was taken by the Council of Ministers and enacted in Community law some considerable time ago. It is not a proposal from the Commission which has still to be adopted by Council. Public comment sometimes suggest these are new proposals which can be obstructed by Ireland or other member states. This is not the position. The question of obtaining a derogation does not arise.

The Commissioner with responsibility for the internal market, Mario Monti, has confirmed that the Commission has no intention of bringing forward any proposal for a further retention of duty free and tax free sales beyond the current expiry date of 30 June 1999. If there is no Commission proposal on the table to that effect, the Council cannot adopt any measures to extend the concession.

Aer Rianta has taken many steps to diversify its activities, including the operation of duty free shops outside the European Union. It operates in Russia and in the Middle and Far East and has adopted a prudential attitude to the question of duty free sales and the issue of extension post-1999. Obviously it would like the concession to continue but has not placed all its eggs in that basket and will be able to cope with the changing circumstances. Increased passenger throughput at the Irish airports will help and I am pleased growth in traffic is strong and looks set to continue.

Aer Rianta and Nat West Ventures recently completed a deal whereby they will hold a 40 per cent stake in Birminghan International Airport. The chief executive of Aer Rianta has stated this is a long-term venture which fits perfectly into its corporate plans.

I am aware of concerns over ending duty free facilities for EU travellers and note what the Deputy said. The Irish and EU duty free sector have been making clear their difficulties with the situation. At the ECOFIN Council on 11 November 1996, the Minister for Finance, Deputy Quinn, raised the issue specifically but did not receive any support from ministerial colleagues for a proposal to commission an independent study into the effect of the abolition of the duty free sales post 1 July 1999. Neither was there support for an extension of the time period. The Minister for Finance and I will monitor the position but the right of initiative in this case rests with the EU Commission.