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
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
5 June 2006