Airport VAT scam: Five things you need to know about the boarding pass rip-off
The scandal went viral and around the world, prompting travellers to ask why they were apparently being ripped off by airport stores. In effect the retailers were (allegedly) recovering the Sales Tax, but not passing it on to the customer. It was a global PR disaster for Travel Retail.
This is a complex subject. Much depends on each location and each product and price – all related to the fiscal conditions by country.
Forgetting for a moment these regulatory idiosyncrasies by territory, ‘Duty Free’, ‘Tax Free’ and ‘Travel Retail’ have largely morphed into becoming one and the same in the global marketing world of shopping on your travels.
These descriptions were meant to denote bargains for consumers, because they were travelling and outside their various tax regimes. It is this very concept that formed the bedrock and stimulated sales at airports.
The problem is that ‘Duty Free Shopping’ has, more often than not, transformed into a mixed bag of ‘Luxury Shopping’, where the price advantage is minimal – unless you come from a developing country that imposes huge import taxes on luxuries. Brazil, China or India could all well fit this mould.
But let’s be clear about the market. The industry understands this (albeit in denial), but the consumer simply does not know if he is coming or going when it comes to the rules. All they want is the brand they like at the best discount price. Over time, the industry waters have been seriously muddied – especially in Europe.
All well and good. Let the retailers manage the message to their best advantage, whilst running the risk that another smart journalist might just cut through the hype and find a cavernous loophole to generate great consumer advice and traffic.
Soon, along comes Britain’s Brexit and the mounting industry discussion about ‘Bringing back Duty Free’ between the UK and their former friends. That is, all those EU territories that cannot sell Tax or Duty free to everyone travelling between the Bloc. Nor to or from the UK and other EU member states.
A nice idea – unless you are a smoker or a drinker. Why? Because nobody has thought how the Duty Free Allowances will drop from the current intra-EU ‘Recommended Allowance’ for Tax Paid purchases, returning to the international ‘Duty Free Allowances’ (or have they?).
So, if you are a smoker standing in Malaga airport today, you can buy and bring back 800 cigarettes to Britain without getting any hassle from Customs. You could also – technically – bring 10 litres of whisky, although it would be hard to carry so much onto the flight. Your price for these intra-EU goods is not much different to that you would pay if you were flying outside the EU and getting ‘real’ Duty Free prices.
Result? ‘Bringing back Duty Free’ actually reduces my limit down to 200 cigarettes and 1 litre of whisky. A serious reduction in volume for the travel retailer and a loss in margin, too. I can only only smoke and drink for a week, instead of a month. No really a consumer friendly
innovation, then.
