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. Last Updated: 07/27/2016

Duty Free Shopping Ends in EU

BRUSSELS, Belgium -- Duty free shopping in Europe died at midnight Wednesday, heralding an end to one source of cheap alcohol and cigarettes for travelers and lower profits for many transport firms.

Millions of British day-trippers to France felt the impact immediately, with shops on ferries staying shut until halfway across the Channel, when prices based on lower French excise duties can be applied. The same was true for Danes traveling to relatively low taxed Germany.

Some may soon even find themselves having to pay more for their journeys. In Sweden, tour operators were expected to impose a $20 surcharge on new bookings, which is necessary to compensate for higher charges from airlines suffering from the end of duty free sales on aircraft.

But for most Europeans the end did not make much of a difference as the freedom to exploit Europe's patchwork of tax regimes remains.

Large airports and ferry companies have no plans to close "tax free" shops and are seeking to persuade customers they still offer a good deal.

Tobacco and alcoholic drinks will no longer be as cheap and, in the case of airports, may not be stocked at all.

But airports in Belgium, the Netherlands, Finland, Denmark, Germany, France, Italy, Spain and Portugal have said they will hold the price of luxury products such as textiles and electronics at pre-July 1 levels.

They plan to pay the value added tax due after that date from operating margins, seeking to limit the damage on profits by squeezing their suppliers and building more shops.

"All products except alcohol and cigarettes will remain at the same price as today," said Philippe Gruwez, managing director of Belgian Sky Shops, which operates outlets at Brussels International Airport.

The executive European Commission in Brussels sees the move as vindicating its argument that "duty free" was never little more than a hidden subsidy distorting competition.

That view is shared by rival transport operators who never had the possibility to sell duty free. The high-speed train company Eurostar, which competes with airlines on routes between London, Paris and Brussels, welcomed the end of duty free as the arrival at last of "a level playing field."

But to airport operators, ferry companies and their suppliers the losses from the abolition of duty free will be real. It could mean higher ticket prices and job losses.

"We expect to have 60 to 80 million [Dutch] guilders ($37.75 million) less turnover," said Mariona van ter Goot, spokeswoman for Amsterdam's Schiphol Airport group, whose shops had a total turnover of 725 million guilders in 1998.

Big operators are optimistic they will find ways of compensating. Smaller airports and ferry operators were likely to feel the pinch, they said.

"We are working on new shops in the terminal building ? so in a few years we expect to be level again," van ter Goot said. No jobs are to be cut.

Ferry operators are doing all they can to limit the damage.

Gert Jakobsen, spokesman for Denmark's Scandline ferries, said the company planned to exploit the variation in Danish and German taxes.

Shops on Scandline ferries from Rodby to Puttgarden will stay shut for half the 45-minute crossing. But, on the return journey, on-board shops will open while ships are still in dock. On June 17 the company opened an onshore shop to fully benefit from lower German taxes. "We could not do that before," Jakobsen said.