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EU may delay abolition of duty-free shopping

DUTY-FREE shopping operators are increasingly hopeful that the European Union will slap an indefinite delay on plans to abolish duty- free shopping in Europe by July next year.

BAA, the airports operator which is one of the largest duty-free retailers, said there were increasing signs that European finance ministers would vote to delay the abolition when they meet next March.

The optimism is prompted by the political swing in Europe which has brought left-of-centre governments to power. Both Lionel Jospin, prime minister of France, and Gerhard Schroder, chancellor of Germany, have advocated a delay. Italy has also indicated its support.

John Prescott, the Deputy Prime Minister, was also supportive of a recent call by European transport ministers for a review of the impact of abolishing duty-free shopping.

Brian Collie, retail director of BAA, said: "Politically, ministers are now very much more on the side of employment as opposed to the ideal of a single market. Economically, no national government voting for the imposition of duty can ignore the impact on jobs."

The Duty-Free Confederation, a lobby group for the transport and liquor industries, warns that abolition of duty-free shopping will cause the loss of 140,000 jobs across Europe and 23,000 in the UK.

The impact on the travel industry, which uses profits from duty-free sales to subsidise ticket prices, is expected to be substantial. BAA says it will see a pounds 77m reduction in profits every year. The travel industry also warns that abolishing duty-free shopping could lead to chaos as people cross borders to take advantage of low-duty tax regimes.

"You will have the nonsense in 1999 of people buying from low duty areas to sell in high duty areas," Mr Collie said. "I believe the government will be supportive of any change if a compromise can be found."

The abolition of duty-free shopping, ordered by EU finance ministers in 1991, has already been delayed. In 1991, EU ministers voted for an abolition in 1993. This was subsequently delayed to give members time to harmonise their tax regimes.

A spokeswoman for Customs & Excise said some EU members were still opposed to a delay. Any decision would require unanimous agreement by EU finance ministers.