Bounced from transport ministers to finance ministers, and on to Europe's heads of state and government, the final day of reckoning for duty-free was to be last week's Berlin summit. But the crisis in Kosovo and the all-night wrangle over Agenda 2000 pushed it off the agenda. It now lies in a sort of political limbo, but could be raised at an as-yet unscheduled, emergency summit later this month, or at the Cologne summit on June 2nd.
As matters rest, duty-free for travellers within the European Union will end on June 30th. But Germany stands ready with a proposal to cushion the blow to the industry; under this, VAT would be charged on all goods from July, but duties would not be imposed until the start of 2002.
The duty-free lobby believes 14 out of the 15 EU heads of state are willing to back the German proposal, and that the last country, Denmark, might be ready to do a deal. Other, political observers, however, say that while they expect a certain amount of grandstanding by Britain's Mr Tony Blair and Germany's Mr Gerhardt Schroder on the issue, there is little real enthusiasm to extend the life of duty-free even by 21/2 years.
But certain factors emerging in recent weeks may have shifted the balance in favour of the German proposal.
Firstly, the European Commission that opposed an extension of duty-free has been forced to resign in disgrace. Secondly, because of the resignation scandal, the incoming Commission will wish to be perceived as closer to ordinary Europeans, and might see "saving" duty-free as an attractive move. Thirdly, if the issue is not dealt with at an emergency summit this month, it will be raised at the Cologne summit on June 2nd. This gathering will have unemployment as its theme, and the heads of state and government might balk at rejecting a German proposal which would save thousands of jobs.
Employment, along with popularity with the public and its effect in lowering air and ferry tickets, form a solid case for retaining duty-free. But the summit will also hear powerful arguments for abolishing it without delay. Duty-free benefits the wealthy - who travel more - disproportionately; it costs EU states #1.9 billion (£1.5 billion) in unpaid revenues; it subsidises smokers; and it distorts the travel market, undermining, for example, train travel.
Whether or not the Taoiseach, Mr Ahern, and his colleagues vote for the German proposal, they must devise a structure for duty-free payments. It would be simple enough to tell Aer Rianta that it must charge VAT and duty at Irish airports. But what rate of VAT or duty would be paid by passengers on, say, a Ryanair flight from Dublin to Paris? Or the Dun Laoghaire-Holyhead ferry?
The simplest approach, and the one likely to be favoured at EU level, would be to apply the rate of tax of the state in which the journey originates. But a legal battle is already on the cards between the ferry operators and the European Commission.
The companies will argue that under maritime law, when a boat is in international waters it is not obliged to collect tax for any government.
The Commission will claim that trips between EU states, like trips between US states such as California and Hawaii, can no longer be considered international trips, and passengers should have to pay the taxes.
