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Monday, July 15, 2024

Corona may finally kill off duty-free

Never before has the future of Norway’s admittedly “absurd” duty-free shopping system been more vulnerable to permanent shutdown. After living without travel abroad during the past Corona year, many claim the time is now ripe to do away with the duty-free quotas such travel has allowed.

Airline passengers are all but herded through the large duty-free shopping halls here at Oslo’s main airport at Gardermoen, where sales have generated billions for the airports’ budgets. PHOTO: Avinor

The debate over what Norwegians call “taxfree” has raged for years. It has helped finance Norway’s airports over the years and most travelers love it for the sheer savings it offers, since prices at the “taxfree” shops are much lower than they are at the state-run liquor monopoly Vinmonopolet, or at local cosmetic counters. Arriving airline and ferry passengers without shopping bags full of liquor, cosmetics or tobacco from the duty-free shops are a rare sight in Norway.

Now debate is swirling again, after a government-appointed commission of finance and economy experts released an evaluation last month of the economic consequences of the pandemic, its infection-control measures and compensation programs. Among the commission’s most concrete proposals to the finance ministry was to scrap Norway’s duty-free system, claiming it “undermines the Norwegian fee system and Norwegian alcohol- and tobacco policy, increases access and consumption of alcohol and tobacco, and challenges Vinmonopolet’s position.” The commission also cited its “unfortunate” effects on the climate and environment: “It contributes towards lower ticket prices, making airline traffic and emissions higher than they otherwise would be.”

There’s a lot of money at stake, though. The agreement that Norway’s state-controlled airports agency Avinor has with private suppliers to sell discounted alcohol, tobacco, sweets and consmetics, for example, has generated around NOK 46 billion (at least USD 6 billion) over the last 18 years. Their contract is coming up for renewal soon, making the debate even more timely, but recent governments have turned down proposals to have Vinmonopolet take over duty-free sales.

Vinmonopolet, meanwhile, has flourished with booming sales since the Corona crisis began. Not only have Corona restrictions halted most travel and closed airports’ duty-free shops, they’ve also ended shopping trips over the border to Sweden (where taxes and prices are much lower than in Norway). The commission estimates an extra NOK 2 billion in net revenues from Vinmonopolet to the state treasury if duty-free is closed permanently.

‘Taxfree nonsense’
Newspapers Dagsavisen, Dagens Næringsliv (DN) and Aftenposten have all editorialized in favour of scrapping the duty-free system just in the past week, calling it everything from “absurd” to “a strange bird.” Aftenposten stressed how the current system isn’t good for either public health, the climate or social fairness, but noted how political willingness to shut it down remains low. “The theory is that folks are so fond of cheap spirits that it would be political suicide to mess with it,” Aftenposten wrote.

Now, however, when a duty-free shopping spree is a dim memory for most, the timing is “perfect” to phase it out, claimed all three newspapers. “Shut down this taxfree nonsense,” wrote Dagsavisen. “Remove the connection between alcohol sales and transport,” wrote Aftenposten. DN accused the government and Parliament of “political cowardice.”

Lower punitive taxes instead
Both DN and Aftenposten also offered means of easing any blow on Norwegian consumers: The government could simply lower the punitive fees on alcohol in general in Norway, a move that would also reduce the incentive to drive over the border to Sweden when that becomes possible again. The commission suggested the same in its report as well, as a means of also reducing trade leakage in border areas.

Aftenposten also suggested ways of helping Avinor make up for lost duty-free revenue: a sizeable chunk of the higher revenues generated by Vinomonopolet could be earmarked for Avinor, and airline passengers could be charged higher fees. That would be in line with the “polluters pay” theory that already is common in Norwegian climate policy. The resulting higher airfares could also ward off a new boom in airline traffic.

“When the country opens up again, we should be able to party but without tax-free wine and spirits,” wrote Aftenposten. “Many will miss their quotas if they disappear, but if Finance Minister Jan Tore Sanner can offer cheaper alcohol at Vinmonopolet, the party mood could still be good.”

The commission’s conclusions have been put out to hearing, with a deadline for response by June 25. Then Sanner’s ministry is expected to send its proposals to Parliament, if his Conservative Party survives the September election. Berglund



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