EUROPEAN TRANSPORT FIRMS LAUNCH EFFORT TO SAVE DUTY-FREE SALES

EUROPEAN TRANSPORT FIRMS LAUNCH EFFORT TO SAVE DUTY-FREE SALES

European airports, airlines and ferry companies have launched a joint effort to stop the European Community from scrapping duty-free sales, one of their most profitable sidelines.

The European Commission, the EC's executive body, wants to phase-out duty- free sales as part of its program to create a single common market among its 12 member states by 1992.Airports and ferry companies would be hardest hit by the loss of duty-free sales.

The tax-free shops at Amsterdam's Schiphol Airport, widely regarded as the best in the world, make annual profits of about $32 million. But after 1992, only intercontinental passengers will be allowed to shop there for bargains.

Duty-free shops are among the most profitable operations of the British

Airports Authority, which owns Heathrow and Gatwick, the world's largest international airports.

Ferries plying the North Sea and the English Channel face even greater losses if the Commission outlaws duty-free sales. UK ferry operators derive

revenues of about $304 million a year from duty-free sales by sharply marking up the price of luxury goods. Half of these revenues are used to cross- subsidize passenger fares.

The General Council of British Shipping says fares would have to rise by at least 25 percent to compensate for the loss of duty-free sales.

The European Community also wants to extend sales tax to ferry fares that could raise prices by up to 9 percent, according to the ferry companies.

The loss of duty-free revenues will compound the problems of ferry lines that will be competing against the cross channel tunnel in 1993, a year after duty free sales are due to be abolished.

The EC's drive to harmonize value added (sales) tax and excise duties within the Community, will also raise prices for ships' bunkers and equipment. This would put EC-based shipowners at a disadvantage to lines from outside the EC who can buy tax-free fuel.

The combined effect of these increases would be a 40 percent rise in fares, according to shipowners who want their industry to be treated as a special case.

Abolishing duty-free shopping will also kill off the so-called butter ships. These floating supermarkets, usually flying Liberian and Panamanian flags, sail between West Germany and Denmark loaded with bargain hunters seeking the best duty-free deals. The price of fares is nominal as the shipping lines make all their profit from duty-free sales.

The European Commission is thought unlikely to concede to demands to preserve duty-free sales. It argues that the ending of customs checks, essential for a free market, will result in a huge rise in cross-border shopping. Thus, member states must harmonize all sales taxes and excise duties to prevent an artificial distortion to trade.