National Policy Interests in the Duty-Free Market

In 1999 the EU abolished duty-free on intra-EU travel. OtherEuropean countries and many countries outside Europe still retainduty-free shopping for international travellers, as does theEU in relation to external travel. This paper looks at nationalpolicy interests in the retention, or further abolition, ofduty-free. We note that these will relate closely to the structureof competition in the duty-free market, and to the tax levelson high-street sales in different countries. The existence ofduty-free trade requires that countries have reasons both toadmit duty-free goods and to permit their sale to departingpassengers. We argue that low-tax countries might be more likelyto perceive gains from unilateral abolition of duty-free salesto departing passengers, while high-tax countries would onlybenefit from concerted action to abolish duty-free. (JEL D4,H2, H87)