Return
to Story Page
To print: Select File and then Print from your
browser's menu
Belinda Goldsmith
Stockholm, Aug 21: A cluster of Baltic Sea islands between Finland and Sweden is set to become the battleground in European ferry operators' fight to keep lucrative duty-free sales.
Stockholm, Aug 21: A cluster of Baltic Sea islands between Finland and Sweden is set to become the battleground in European ferry operators' fight to keep lucrative duty-free sales.
Every year 1.5 million overnight and day trippers take the boat to the tax-free Finnish archipelago of Aland, enjoying the sea air and onboard dancing and, above all, the duty-free booze.
The number of boats is expected to surge by about 30 per cent from July 1999 when duty-free sales are abolished on trips within the European Union (EU) -- but the Aland islands, an autonomous Finnish territory, will retain tax-free status.
"A lot of people don't even place a foot on Aland ground when they come over by boat," Gunilla Nordlund, managing director at the Aland Tourist Bureau said. "They are just here to enjoy the voyage over and the duty free shopping on board. This will become more pronounced."
European ferry operators, like Finland's Silja Line and Viking Line and Sweden's Stena Line, are looking for ways around a 1992 EU decision that bans duty-free sales in the 15-country union from mid-1999.
The EU sees duty-free sales as an anomaly in the single market, distorting competition and giving unfair tax advantages for regular air and ferry travellers financed by taxpayers.
Sweden's Stena Line said duty free sales in onboard shops accounted for 2.73 billion crowns ($344.6 million) or 28 per cent of the company's 9.75 billion crown operating income in 1997.
Stena, the world's largest ferry company which joined forces with Britain's P&O on Anglo-French routes this year, has estimated up to 80,000 jobs could be lost in Europe when tax-free retailing ends.
"It is the shop sales that will be directly affected if duty free sales are abolished," a Stena Line spokeswoman said.
"The entire industry will have to raise its ticket and freight prices, irrespective of the effect of the cost cutting measures, if duty free sales come to an end."
This is where Aland, a group of 6,500 unspoilt islands at the mouth of the Gulf of Bothnia, could stand to benefit.
When Finland joined the EU in January 1995 and become subject to the 1999 abolition of duty-free, Aland's 25,000 residents argued their survival depended on duty-free traffic.
"Without duty free sales, we would see a 40 per cent decrease in the economy which would mean disaster for our society," Roger Nordlund, deputy head of the Aland government and responsible for finance said.
"The whole society is so dependent on good communications and shipping traffic."
With this life or death scenario, Aland won the right to keep its duty-free status after July 1, 1999, and retain its attraction for price conscious visitors.
Alanders are used to having a special status. The islands have been an independent, demilitarised province of Finland since 1921, with a 30-member parliament that passes laws and sets the budget. Islanders speak Swedish, not Finnish.
Ferry operators see stop-offs in third ports such Aland's picturesque capital of Mariehamn or Tallinn, the capital of the non EU-nation of Estonia across the Baltic Sea, as one way to circumvent the end of duty-free.
This loop-hole could prompt other ferry operators to examine similar third Port opportunities, such as stopovers in the Channel Islands on routes between Britain and France.
Finland's Silja Line and Viking Line, which carry 2.5 million passengers a year on daily services between Stockholm and Helsinki, are considering stopping off at Aland or Tallinn to maintain duty free sales.
Alanders are already preparing for more visitors with work underway in the harbour at Mariehamn to make docking quick.
"We have not yet decided where we will stop off but we will break the journey somewhere," said spokeswoman Seija-Riitta Laakso of Silja Line, whose parent company recently changed its name to Neptun Maritime Oyj.
"This will add some time to the current trip (of 14 to 16hours) but a survey of passengers found only seven per cent saw this as a problem. The rest preferred to keep duty free."
Laakso said the sale of tickets on Silja Line's five routes accounted for about 30 per cent of income, onboard restaurants about 30 per cent and shopping 40 per cent.
"We are trying, like airports, to offer more and more products in our shops to keep people interested in the onboard shopping even without duty free," Laakso said.
Viking Line's chief executive, Nils-Erik Eklund, expected to decide on Aland or Tallinn as a stop in late October.
"We feel this is an essential move to give our customers the best and keep fares as low as in the past," Eklund said.
"The decision to stop tax-free sales will mean for sea transport the same as closing down the motorways in Europe. The costs of transport in Europe will rise quite dramatically.
"I don't think the people in the EU responsible for tax really looked at what would happen now it may be too late." ($1 =7.922 Swedish Crown)
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
------------------------------------------------------------
This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
------------------------------------------------------------