This evening (6 September) marks a significant waypoint in the battle waged by a coalition of industry, airports and politicians to see the possible introduction of UK arrivals duty free, with the issue receiving a dedicated debate in the House of Commons.
Conservative MP for Crawley Henry Smith – whose constituency includes London Gatwick Airport – has secured the debate: ‘Duty on shopping at UK entry points’ as the last adjournment of Parliament’s business for the day.
The political spotlight shines as the UK Travel Retail Forum (UKTRF) presses the British government to introduce arrivals duty free, insisting the move is a “win-win” for passengers and a boon for businesses looking to boost sales.
Now the UK has left the EU, customs regulations are in London’s hands and implementing arrivals duty free would be an obvious demonstration of that newly-won power.
And, says the UKTRF, the move would be cost-neutral to the Treasury and would also increase revenues from corporation and income tax.
The issue is fast rocketing to the top of the political agenda with a slew of high-profile opportunities to make the case for arrivals duty free, now the UK Parliament has returned after the summer recess, including the 6 September debate, the King’s Speech and Chancellor of the Exchequer, Jeremy Hunt’s Autumn Statement.
The UKTRF maintains in a statement that separate research on the topic conducted last year reveals income tax generated from new jobs and increased corporation tax, would offset any loss of crown revenues in the UK, with predictions the policy could result in an additional £50 million for HM Treasury.
Bringing sales back to British airports and businesses
Henry Smith – who is also chairman of the All Party Parliamentary Group for The Future of Aviation chairman – told TRBusiness: “I’ve been leading calls in Parliament for the introduction of duty free stores on arrival at UK airports such as London Gatwick, which is a crucial part of my constituency.
“This simple policy would bring significant economic benefits to UK businesses and would support our aviation, travel and tourism industries as they continue to recover from the pandemic.
“The increase in DF allowances following our departure from the EU was welcome; however, British businesses are not currently seeing the benefit as without arrivals DF stores these sales can only take place abroad. The introduction of DF shopping for passengers arriving in the UK would bring these sales back to British airports and businesses.
“I hope the government will finally get behind this campaign, which has cross-party support and the backing of industry.
“[Some] 65 countries have implemented the policy so far. It’s time the UK did the same, so we can truly take advantage of our Brexit freedoms.”
London Gatwick (LGW) – the world’s busiest single runway airport – is backing its MP’s stance with Retail Director, Rachel Bulford, insisting arrivals duty free would be a ‘repatriation’ of such sales which would otherwise happen outside the UK.
“We back the introduction of duty free shopping for arriving passengers at UK airports,” said Bulford, speaking to TRBusiness. “The move would increase competitiveness with European countries, allowing UK tourists to buy goods on arrival, rather than in a European airport prior to travel.
“Purchases at arrival DF stores would have little to no impact on domestic sales and would be a ‘repatriation’ of duty-free sales that would normally happen outside the UK. There would be no impact on tax revenue, and no increase in the amount of products entering the market.”
“All taxes under review” – HM Treasury
The issue however, could well run into opposition from HM Treasury, which is pointing to the impact providing arrivals duty free could have on the Exchequer’s coffers.
Should arrivals duty free be introduced, notes the Treasury, the loss in tax revenue might have to be balanced by a reduction in public spending, increased borrowing or extra taxation elsewhere.
An HM Treasury spokesperson told TR Business: “We keep all taxes under review.
“Excise duty makes a significant contribution to the public finances and duty free on arrival would impose additional pressure at a time when we’ve already had to take difficult decisions to get debt falling.”
But the idea has also secured the heavyweight endorsement of the European Travel Retail Confederation (ETRC), whose Secretary General, Julie Lassaigne, told TRBusiness the concept allows travel retail operators to compete more effectively with competitors globally.
“This is a concept which ETRC strongly advocates across all European markets,” said Lassaigne.
“Key findings from a recently published report from York Aviation, commissioned by ETRC to look at existing examples where tax and duty free on arrivals have worked in a European context, underline the contribution arrivals duty and tax free could make to European aviation.”
York Aviation predicts arrivals duty free stores will result in additional sales of £100m each year, as an increase in spend per passenger of between 20%-30% is anticipated.
As has been the case in Norway, this figure will likely be exceeded as passenger awareness of arrivals stores increases.
ETRC “fully supports” UKTRF campaign
Lassaigne added: “As the country case studies of Norway, Switzerland and Turkey show, the additional commercial revenue stream enabled by arrivals duty and tax free has supported airports’ viability, investment and growth, with no evidence to suggest adverse impacts on domestic markets or government revenue.
“ETRC fully supports the campaign of its member, UKTRF, to secure arrivals duty free for passengers arriving in the UK and its ongoing engagement with the UK government and Treasury.”
For its part, London Heathrow is also backing the campaign, insisting that by passing up on arrivals duty free, the UK is losing competitive advantage as sales are being diverted to international competitors.
Hot on the heels of the adjournment, Parliament will also debate the potential for tax free shopping on 7 September.