Duty and Tax Free

Tobacco

stock-photo-under-eighteen-sign-on-white-background-jpg-178176482 Following the issue of a major consultation document on the future of tobacco control on 31 May 2008, one of the measures the Department of Health decided to adopt was a ban on the display of tobacco products in retail environments. The UKTRF embarked on a series of detailed discussions with the Department of Health to seek a solution which would meet Government policy but retain the competitiveness of UK airports. The Department accepted the UKTRF’s arguments that airport duty-free shops were a unique environment, totally different from the High Street.

The Tobacco Advertising and Promotion (Display) (England) Regulations 2010 were duly laid before Parliament on 2 March 2010, which permitted bulk tobacconists (cash and carry outlets and duty-free shops – defined in the Regulations as shops that do not sell cigarettes or hand rolling tobacco in small units) to have display areas for tobacco products (“TDAs”), provided that they are not visible from outside the tobacco area. The Regulations require all bulk tobacconists, regardless of size of store, to provide the specified tobacco display area by April 2015. Similar Regulations were introduced in Wales and Northern Ireland. In Scotland the unique environment of airport duty-free shops was also recognised, however the display ban came into effect on 29 April 2013 for large stores and will apply to small stores in April 2015.

Standardised Packaging

Following a review by Sir Cyril Chantler on the impact of smoking on children’s health, the UK Government announced that it was minded to introduce standardised packaging for tobacco products.  It consulted for a 6 week period in July/August 2014 and UKTRF submitted a response to the consultation.

UKTRF noted that:

  • The recognition of the specificity of airport duty-free shops was not reflected in the consultation.
  • No impact study on the impact on the airport duty-free industry had been carried out.
  • The introduction of standardised packaging would place UK airports at a competitive disadvantage vis-a-vis airlines and non-UK airports where no restrictions would be imposed.

UKTRF received no response to its submission.  Nevertheless, the Government announced on 21 January 2015 that it was laying legislation on standardised packaging of tobacco products before Parliament before the May 2015 General Election and this legislation, which takes effect on 20 May 2016, was finally passed by Parliament on 16 March 2015.  Subsequently, an impact statement was released, however, it was very top level and did not demonstrate any understanding of the duty-free market channel.  Indeed, it suggests that airports will bear a totally disproportionate share of the impact.  The following factors do not appear to have been taken into consideration:

  • competition issues unique to duty-free shops, which will lose sales to airlines operating from those very same airports where the shops are located, and to airport stores elsewhere on the passenger journey, and
  •  the significant costs already incurred by airport retailers in reconfiguring their stores to incorporate TDAs (see above).

It has been recognised by the Department for Transport and the Department for Business Innovation and Skills (“BIS”) that this legislation will have a disproportionate effect on the industry and will harm crucial revenues for airports in the future.  The industry will continue to work with its airport partners and the Airport Operators Association (“AOA”) to raise these legitimate concerns and to seek a more pragmatic solution which could reduce the detrimental impact of these measures on airport finances.