The Government of Norway is planning to halve the duty free tobacco allowance for returning residents to the country, TRBusiness can report.
The proposed measure applies to those travellers purchasing tax free tobacco products on arrival to Norway as well as items bought overseas for carriage into the country.
It reduces the tax free quota to 100 cigarettes or 125g of other tobacco products (such as snuff, cigars and cigarillos), and 100 sheets of cigarette paper and includes e-liquids containing nicotine for e-cigarettes as well as other nicotine products.
The change was revealed in the national budget presented to the Norwegian parliament, the Storting, on 6 October, which outlined the state’s economic policy direction for 2023.
The minority coalition government (Labour Party and Centre Party) reached an agreement with its partner (Socialist Left Party) last week (29 November) to secure a parliamentary majority for the budget proposal.
With the budget expected [barring any last-minute changes] to be voted through parliament in mid-December, the rule change would take effect from 1 January 2023 in a move that could have major consequences for the country’s travel retail and duty free sector, including channels such as airports, ports and ferries.
Avinor hits out
While TRBusiness gathers the proposal would not affect the existing duty and tax free tobacco import allowance for international tourists (non-residents) to the country – applicable to items bought in another country or purchased tax free – tourists, like residents, will only be allowed to buy 100 cigarettes or 125g of other tax tobacco products at the airport on arrival in Norway.
According to Norwegian Customs’ website, visitors over the age of 18 to Norway have a duty free personal allowance of 200 cigarettes, 250g of other types of tobacco and 200 sheets of cigarette paper.
For stays abroad of less than 24 hours, travellers can avail of the tobacco allowance provided they can prove that local taxes have been paid in an EEA country.
State-owned airport operator Avinor says the move will result in an estimated loss in its annual income of around NOK 270 million/US$27.7 million annually.
In a report announcing its nine-month results last Monday (28 November), Avinor stated: “The proposals in the state budget for 2023 on reduced tax free quotes for tobacco put further pressure on the group’s equity situation and ability to self-finance. Effects of proposed changes in tax free quotes for tobacco products are incorporated into future cash flows.”
‘Confusing for travellers’
Industry lobbyists believe the change will have a detrimental effect on the revenues and operations of Norway’s tax and duty free sector, causing unintended negative consequences in addition to hurting investment, jobs and connectivity.
Julie Lassaigne, Secretary General of the European Travel Retail Confederation (ETRC), told this publication: “By diverging from the international accepted practice of allowing 200 cigarettes or 250 grams of other tobacco products free of duty and tax, the recent budget proposal to reduce duty free inbound allowances from 1 January 2023 will undoubtedly harm the ability of duty free operators to cater for Norwegian airports, ports and ferry lines – as well as being deeply unsatisfactory and confusing for travellers to Norway.”
Haakon Dagestad, Chairsperson of the Nordic Travel Retail Group (NTRG), which represents the interests of tax and duty free stakeholders across the Nordics and Baltics, echoed concern around the proposed changes.
“There is a worry this will hit duty free sales and shift more of the trade from duty free to border shopping. There is a spillover effect; there is an agreement that the [existing] quota makes it easier for all customs officials in countries if the quota is quite similar, so you don’t need special rules.
“I can be Norwegian living in Sweden and have [a quota of] 200 cigarettes, but if I’m a Swede living in Norway, it’s only 100 cigarettes. How do you document that? It’s a massive amount of hassle and the results won’t be what is expected.”
Aside from suggestions the move could be counterintuitive to the government’s aim of reducing cross-border shopping, there are additional challenges when it comes to manufacturing and supply.
“Products consisting of five packs of tobacco is completely new and they want to create this in weeks,” commented Dagestad.
TRBusiness has learned that NTRG, ETRC and Travel Retail Norway (the Gebr. Heinemann/Norse-Trade AS joint venture – Ed) are engaged with customs and government officials to draw attention to the proposal’s consequences for the industry.
As mentioned, with the new quota proposal contained within the state budget expected to be given the green light in Norway’s parliament, both associations have criticised the short timeline for implementation (1 January 2023) as neither pragmatic nor practical.
“They should not reduce the quota and if they do, they should give us time to adapt,” urged Dagestad.
As reported, a recently conducted study by York Aviation commissioned by ETRC illustrated the healthy economic and financial contributions made by arrivals duty free stores in Norway and other countries.
Norway’s model in particular has long been heralded as an example of the duty free and tax free industry’s contribution towards the long-term viability of the aviation sector.
In the case of state-run Avinor, the study underpins the importance of airport commercial income to the entity’s profitability and growth.
At Oslo Airport, the largest and most profitable of Norway’s airports, arrivals tax and duty free sales takes a 50% slice of all tax and duty free income.
“If allowances are reduced in Norway, travellers in general will be less inclined to purchase and the impact will also affect all other product categories,” warned Lassaigne.
“ETRC urges the Norwegian government to urgently reconsider the impact of the proposed policy changes, and to formally consult with the wider industry before pushing ahead with these changes.”
Approached for comment, a spokesperson from the Government of Norway’s Ministry of Finance told TRBusiness: “The government has proposed to reduce by half the duty free allowance for private import of tobacco products on arrival in Norway.
“The reasons for the proposed change are that it will contribute to a more consistent tobacco policy, be beneficial for the climate and environment and secure a considerable income for the government. The change might also reduce cross-border shopping, in line with the government’s political platform ‘Hurdalsplattformen’.
“As with previous changes to duty free allowances, Norwegian Customs will inform travellers about the new allowances on toll.no and on the official Norwegian Customs social media platforms (Facebook, Snapchat, Instagram and LinkedIn).”
The spokesperson added there were no plans in place at this point to formally consult the duty and tax free industry on the change.
“Public consultations are not normally held for this type of change, which is part of the state budget,” they added.