IRELAND. The Irish Duty Free Alliance (IDFA) has hit back after the Irish Department of Finance issued a report warning of the consequences should there be a return of duty free between the UK and European Union countries.

In a report released last week on the Irish economy’s preparedness for the UK leaving the EU, the Department of Finance warned of the consequences for the Irish economy should the UK exit without a deal, as it is currently scheduled to do on 31 October.

In this scenario, the UK would theoretically have a third country relationship with the European Union, meaning an immediate return to duty free on routes between the UK and the European Union.

As the UK’s closest neighbour, the Irish economy would stand to benefit the most from a return to duty free. With a no-deal Brexit presenting a major challenge to the wider Irish economy, the IDFA has been keen to present a possible return of duty free as a silver lining in the face of what would stand to be an otherwise testing scenario.

About the calculation

The report from the Irish Department of Finance said: “According to CSO data, 7.6 million passengers arrived in Ireland from the UK in 2017 and approximately the same number arrived in the UK from Ireland. For illustrative purposes, if 50% of the total passengers arriving in Ireland from the UK availed of tax-free allowances within the fixed limits for cigarettes and spirits alone, this would have involved the import of 760 million cigarettes and 3.8 million litres of spirits. The excise duty receipts foregone on this quantity of tobacco and cigarettes would total approximately €350 million per annum.”

Yet the report released last week by the Department of Finance warned the Irish economy would stand to forego €350 million (US$386.71 million) in excise duty receipts. This estimate is based on 50% of total passengers arriving in Ireland from the UK using their tax-free allowance.

The Brexit Preparedness report added: “The wider availability of low-priced tobacco and alcohol products in the State would have a negative impact on the Government’s public health policy and it is also likely that the availability of duty free allowances would promote further fiscally motivated travel.”

The IDFA, which has been engaging with the Department of Finance regarding the return of duty free post-Brexit, called on the department to engage with the data it has itself presented.

IDFA Chair Frank O’Connell told The Moodie Davitt Report: “The IDFA is calling for the return of duty free shopping post Brexit, which is in line with existing regulations, and the European Commission’s position. This would be a potential silver lining to an otherwise challenging outlook for the Irish travel retail and tourism sector.

IDFA Chair Frank O’Connell

“The return of duty free also offers the potential for an additional positive economic impact of €45 million to the domestic Irish economy, including 450 additional jobs throughout the country. This is supported by independent research by Irish academics, and so we are calling on the Department of Finance to meaningfully engage with the data.”

The Irish Department of Finance’s reticence to accept a return to duty free has come as a surprise to the IDFA. The European Commission published a notice in November 2018 clearly stipulating that should the UK become a third country, there would be an immediate return to duty free on routes between the UK and all EU countries – a position that European travel retailers have been preparing for.

Yet the report published last week is not the first time the department has pushed back on a return to duty free. In February, an amendment was tabled to a bill preventing the return of duty free sales at Irish airports in the event of a no-deal Brexit.