On my reckoning, about half a tonne of booze was unnecessarily loaded on to JAL flight 403 from Tokyo to London just before Christmas.
The flight was chockers – 350 passengers and crew. Each had a litre or more of booze on average, weighing with glass and paper wrapping perhaps one and a third kilos. Most of it was produced in the British Isles – scotch and gin, the duty-free staples. So it was going back there, unopened. Much of it was bought earlier in Sydney because the Tokyo-London flight was the second leg of a now-popular Sydney-London route. So the booze has gone half way round the world and back again.
Why should this anachronism continue?
The duty free regime originally allowed people on ships to take on shore bottles bought on board. Often duty had been paid elsewhere. Often the bottles were opened and the contents half-drunk. So originally it was a reasonable convenience for travellers. The schemes expanded to include goods bought overseas, so that individual passengers were not hit with duty on single items such as electronic goods when the duty was designed to hit large importers as an industry-protection measure.
These days, protection duties are on the way out. Duties, particularly the GST and tobacco and alcohol excises – are designed to raise revenue or to discourage certain conduct. There is no rationale to let one class of people – travellers – avoid them, while others – stay-at-homes – have to pay them.
If a government puts high taxes on tobacco and booze to discourage consumption, it is inconsistent to encourage a binge while we are on holiday or a business trip.
If governments are raising revenue, why allow the mainly high-income earners who travel to avoid the tax?
The present regime came into force in the mid-1980s. In those days about 100,000 Australians went on overseas trips each year. That has nearly trebled to just under 300,000. In that time the duty-free industry has blossomed about 10 fold to more than $1 billion a year through heavy promotion and the gullibility of travellers.
Indeed, the duty-free industry has boomed in inverse proportion to the duties saved.
It is a cunning industry, especially at airports. Twenty years ago buying a duty-free camera, watch or other electronic item was well worthwhile. The duty was about between 30 and 100 per cent. Now there is no duty, just the 10 per cent GST. And you can get the GST rebated through the Tourist Rebate Scheme even if you buy the item outside the airport. Airport “duty-free” shops have perpetuated the myth of duty-free goods to mugs who would be better off bargaining in an ordinary shop in town.
Travelling mugs are mistreated more on booze and cigarettes. Prices at duty-free shops are lower than outside, but the reduction is not by the same percentage as the duty.
The Federal Government is losing about $300 million a year in revenue. It is losing at least $100 million on the GST. Given that excise on booze and cigarettes is between 30 per cent and 50 per cent and they comprise the lion’s share of the duty-free trade, it is reasonable to add a further $200 million to the $100 million lost on the GST.
The airline industry is losing the costs of carting all this booze around the world – extra fuel, safety problems with overhead lockers and passengers drinking beyond the more controlled measures served by hosties.
BIT ADDED It is time for the airlines to do a deal with governments. It would have to be an international one to work. Present arrangements allow some merchants to sell without duty to bona fide travellers. Just end that arrangement all over the world and charge duty on all imported booze and cigarettes – say a flat $20 per bottle and $5 a packet of cigarettes for administrative convenience.
Australia should also abandon the tourist rebate scheme for the GST, at least for Australian residents. Few Australians seem aware of the scheme, but the “duty-free” industry is doing its best to change that.
NEW PAR Australian residents should be made aware that the benefits of a guarantee enforceable in Australia and the consumer benefits under the Trade Practices Act are worth more than the GST, so overseas purchases to avoid it would not be worthwhile. It would be better if other countries also abolished tax exemptions. But under free-trade principles people should be allowed to bring in whatever legal goods they like without duty.
In return for all this extra revenue, governments could relieve the airline industry of the myriad of taxes which have sprung up over the years. Some have gone and some are just proposed, but most are still with us: the 10 per cent GST, the $10 Ansett levy, the noise levy for Sydney of $3.40, the safety and security charge of up to $5, the global insurance levy of about $25, the $38 departure tax, a luggage screening charge, and a whole range of charges by privatised airport owners.
Getting rid of all of these (bar the GST) would be fairer, as the benefits would be spread more evenly.
The departure tax has little justification now privatised airports provide the infrastructure and impose fees on airlines that filter through to ticket prices.
There are no sound social or economic reasons to keep the duty-free system. It is an ingrained cultural thing, almost a ritual. But a very expensive one.
Alas, loud squeals from the duty-free “industry” might make it politically difficult. But then the tax-deductible lunch and tax-free cars and school fees are things of the past.