Select Committee on European Union Fortieth Report


VAT AND EXCISE DUTY EXEMPTIONS ON GOODS IMPORTED BY PERSONS TRAVELLING FROM THIRD COUNTRIES (6746/06)

Letter from the Chaiman to Rt Hon Dawn Primarolo MP, Paymaster General, HM Treasury

  Thank you very much for your Explanatory Memorandum 6746/06 dated 14 March 2006. Sub-Committee A considered this at their meeting on 25 April and decided to clear it from scrutiny. However, the Committee would like some more information.

  The Committee noted that the Proposal seeks to make provision for a higher limit for travellers arriving in the EU by air. Could you please explain the thinking behind this. The Committee would also be glad to know the effect your analysis indicates this will have on other sectors of the transport market (for example, rail, sea and road) given the incentive this will provide to choose air travel.

26 April 2006

Letter from Rt Hon Dawn Primarolo MP to the Chairman

  Thank you for your letter of 26 April regarding the Explanatory Memorandum for the above proposal. The Committee asked for further information on the provision in the proposal for a higher limit for travellers arriving in the EU by air.

  I understand that the Commission has proposed a distinction between air travellers (€500) and land/sea travellers (€220) to prevent potential problems Member States with third country land borders might have in increasing the existing limit. They have expressed concerns that a significantly higher limit would enable their residents to easily import large quantities of non-EU goods from countries where there are significantly lower price levels, potentially distorting the internal market. On the other hand, those Member States, such as the UK, where third country travellers are primarily air passengers could benefit from the higher threshold for air travellers.

  In terms of the possible effect on other sectors of the transport market, I do not consider that there would be a significant effect on these sectors if the proposal were adopted as it presently stands. In the vast majority of cases, third country travellers would not choose their mode of transport based on the extent of the tax-free allowance they could receive. Rather, consumers will base their decision on the price and convenience of a certain mode of transport for the particular journey they intend to make. Indeed, the tax saving that would be made with the limits proposed would be unlikely to compensate for the likely higher cost of air travel in most cases.

  I should, of course, reiterate as explained in the EM, that the Government considers that the travellers' allowance should be raised to £1,000 and apply to all travellers.

5 June 2006



 
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