EU to consider inbound tax-free allowance increase

Gavin Lipsith

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An increase could be good news for non-European travel retailers' sales of fashion, electrical and luxury items

The European Commission has accepted UK Chancellor of the Exchequer Gordon Brown's request for an investigation into tax-free allowances for returning Europeans. In a letter to the new EC commissioner for taxation and customs Laszlo Kovacs, Brown argued that the current limit of £145 ($274), set in 1994, was out of date and that "a higher threshold would better support cross-border shoppers and reduce burdens both on travellers and on Customs authorities". A report in London's Financial Times suggests the UK treasury is arguing for the new limit to be up to £1,000 ($1,887).

Brown used the US as an example, given the number of UK travellers taking shopping holidays to the country. But for the proposal to be workable an increase would have to be applied to all non-European destinations. GBat Beckenham director Graham Austin told RavenFox.com that although the proposal was in the very early stages, it could prove a positive one for non-European operators.

"The allowance covers all consumer goods outside the traditional duty-free categories of tobacco and liquor," he said. "So an increase would be good for duty-free operators as they would be able to sell more electrical, luxury and fashion items to returning Europeans."

But any amendment in the allowance would require the unanimous consent of all 25 members of the EU, and some Eastern European members are likely to object to the increase as lower prices in neighbouring non-EU could result in an increase in cheap imports. However, Austin said there was a general feeling within the EU that the current limit is out of date. "With today's prices £145 buys you very little," he said, "and it costs more to police the limit than it actually brings in."

Austin praised the new customs and taxation commissioner for his quick and positive response to the UK's letter. "It is very encouraging that Kovacs has recognised that the current allowance is more of an administrative burden than a beneficial limit," he said.

The proposal is the first to re-assess the limit since 1994. As yet no details are available regarding the timeline for discussion of the proposal.