The Demise Of Duty Free

Millions of Europeans traveling to neighboring nations by plane, boat and hovercraft long have snapped up tax-free liquor, tobacco, perfume and other goods at duty-free shops. But that's all coming to an end.

At midnight Wednesday, the European Union was abolishing duty-free shopping for travelers within its borders, ending a much-cherished institution and a business worth $7 billion a year.

Â"It's a sad day for consumers,Â" said Barry Goddard, secretary general of the British Duty Free Confederation, which led a campaign to save the travelers' perk.

The EU's top tax official hailed the demise of duty-free shopping, which he had long denounced as an unfair tax break that made no sense in the European Union, where border controls have largely disappeared.

Â"This is excellent news for EU taxpayers,Â" said Mario Monti, the EU tax commissioner.

The demise of duty-free shopping won't wipe out opportunities for bargain-hunting travelers.

Duty-free stores at Europe's airports will stay open for travelers in and out of the EU's 15 nations, and those purchases will be unaffected by the new ruling. Many duty-free stores say they will hold down goods' prices by absorbing the costs of taxes and duties, but some airport authorities acknowledge prices of alcoholic drinks and tobacco products will rise.

Travelers seeking cheap drinks and smokes will still be able to find a good deal on Europe's ferries, thanks to differences in tax levels in the various EU nations.

For example, British travelers on so-called Â"booze cruisesÂ" to France can buy beer, wine and spirits much cheaper than at home. As soon as a ferry enters French territorial waters, its riders can pay the much lower French alcohol taxes.

Â"Eighty percent of our customers are British. They have strong incentives to buy duty-paid in French waters,Â" said Chris Laming of P and 0 Stena Lines, which operates 35 daily sailings each way between Dover, England, and Calais, France.

In the Baltic Sea, ferries that take 10 million passengers a year between Stockholm, Sweden, and Helsinki, Finland, will now detour to the Aland Islands, a self-governing Finnish region that successfully lobbied for an exemption from the duty-free ban.

For Aland -- a Swedish-speaking region of 6,500 islands and 25,000 people -- winning an exception was matter of survival, its governor said.

Â"If (duty-free shopping) had ended now, shipping here would have collapsed immediately, the Aland economy would have collapsed,Â" said Peter Lindback. Â"This is vital for the economic interests of the islands.Â"

The Alands are the most significant duty-free stop among a handful of islands and enclaves that will escape the ban, from Spain's Canary Islands to Germany's Helgoland.

Elsewhere, people behind the campaign to save duty-free shopping predicted dire economic consequences, with tens of thousands of job losses, highr ticket prices and cuts to ferry routes.

The EU's Monti dismissed such talk. He said the EU could provide aid if difficulties arise on specific ferry routes.

EU nations agreed unanimously in 1991 to ban duty-free shopping and gave the industry until June 30, 1999, to prepare. Most EU leaders later changed their minds, but they needed unanimous agreement to overturn the ban and failed to overcome Danish and Dutch resistance.