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Most countries allow travellers (whether visitors or returning travellers) to import stated limits of goods, alcohol and tobacco into the country free of duty and tax.

What is the reasoning behind this? I can't see any benefit to the country, they are just depriving themselves of tax revenue. And if it is to encourage tourists, then why are residents allowed to import duty-free as well?

I could understand small allowances for goods so tourists can bring back souvenirs and visitors can bring gifts, but this does not explain the alcohol and tobacco allowances.

Why did this practice start and why does it still exist?

Edit:

There have been comments and answers that speculate about the reason but nothing concrete. To clarify, almost all countries have duty free allowances, that are not based on reciprocity. E.g. Barbados does not allow you to take in cigarettes, Saudi Arabia forbids alcohol, yet travellers from these countries can bring them in to other countries. A traveller from Dublin to London can bring in 4 litres of spirits on the outbound journey but only 1 litre on return.

In terms of practicality, as in why bother taxing people on a small amount or creating friction at the border, well many governments do not have any qualms about this sort of thing. Duty-free allowances do not just exist in democracies where the ruling party have to curry favour with the populous but in absolute monarchies and dictatorships.

Duty-free seems to exist in almost all countries regardless of the type of governance. It is almost a universal norm. Why is this?

Second edit:

Regarding current duty-free allowances, there must be acts of parliament, congress etc. that permit them. And there must also be reasoning behind them.

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    Things like tobacco and alcohol (both heavily taxed through much of history) are carried and consumed by many travelers. Imagine filling a customs form for 1.5 packages of cigarettes one way, and half a bottle of vodka going the other way. The administrative overhead would be excessive. In a similar vein, where I live import taxes below €1 will not be collected for mail-order goods.
    – o.m.
    Commented Jul 23, 2021 at 18:27
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    @o.m. that may very well explain it's introduction, but it doesn't explain why for example the UK allows you to import 4 litres of spirits. Commented Jul 23, 2021 at 18:42
  • I am wondering if there is any mystery to it. Surely it is the result of a bunch of people pushing their own causes. That is, the only principle at work is compromise in order to get agreement on the issues politicians think are more important. I'll give you a $100 limit on import of tobacco if you will agree to tariffs on imported booze because booze makers are a big employer in my constituency. Am I wrong?
    – puppetsock
    Commented Jul 23, 2021 at 19:00
  • @o.m.: Another possible factor is that when you make every traveller fill in those forms for small amounts of goods, and pay small amounts of tax, you annoy a lot of voters. Annoyed voters are more likely to vote for the opposition.
    – jamesqf
    Commented Jul 23, 2021 at 19:28
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    @jamesqf I see your point, but surely it would be easier to prohibit any import. I would be in trouble if I tried to bring in a sandwich into Australia for example, but I am allowed cigarettes and booze. Commented Jul 23, 2021 at 19:58

2 Answers 2

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The reason for the practice in general is the same as for the tax free allowance for imported goods - it allowed travellers to bring back small amounts of alcohol as 'souveniers' - especially small amounts of alcohol specific to the place they visited, like ouzo from Greece or Tequila from Mexico.

Because alcohol is one of the most heavily taxed classes of goods, travellers got into the habit of always buying alcohol when abroad, because they could get it cheaper since it didn't have tax. That also lead to the "airport duty free" where tax was not charged by the selling country for alcohol being exported.

The comments ask about the specific high duty free allowances to the UK. These derive specifically from the relationship with France, where wine in particular was taxed at very low rates (this was before the entry of the UK into the single market). Travellers to France would often bring back significant quantities of alcohol, and the large duty free allowance was extremely popular. In fact the "Calais wine run" was a popular phenomenon in which a group of Brits would take a day trip to Calais on the ferry, solely for the purpose of purchasing wine and other alcohol in one of the Calais superstores opened specifically for the purpose. The duty free allowances were large enough to make this worthwhile.

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  • Thanks for your answer. Regarding the UK part of your answer, if memory serves the "booze cruises" started after the Maastricht Treaty, when you were allowed to import any amount for personal use from other EU countries. This was separate from duty-free allowances which applied to people arriving from third countries. Commented Jul 23, 2021 at 20:34
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    You may well be right. Commented Jul 23, 2021 at 20:41
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    @RobinSalih Nitpick: the EU allows its member to impose excise taxes on goods like tobacco, alcohol, cars. Those taxes may be applied to items imported from other EU countries (although usually there is some personal allowance). You are not allowed to import "any amount" for personal use, as one of the key criteria for defining if it is for personal use is the amount you are bringing with you.
    – SJuan76
    Commented Jul 23, 2021 at 23:30
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This is just speculation, but it seems to me that both countries want to increase tourism and trade, which are great sources of revenue. Allowing tourists to bring home small quantities of domestic products both increases the amount tourists spend in the host country, and creates a scarcity or privilege value that can drive exports. For instance, I might take a trip to Barbados, buy a (duty-free) bottle of local rum to share with friends (along with cool stories about the island), and thus encourage my friends to either become tourists themselves or to buy the imported (dutied) rum. This has the potential to generate revenue for both nations far in excess of the duties they would make on a single-bottle import.

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  • Interesting, so you are suggesting it started out as a bunch of bilateral agreements? Commented Jul 23, 2021 at 18:48
  • @RobinSalih: Possibly. Or it may have been mere pragmatics, where no country wants to spend the resources to track down and prosecute such trivial forms of smuggling. The issue goes back as far as their have been import taxes (which is a long way back), so I'm not sure you'll ever find a definitive answer. Commented Jul 23, 2021 at 19:06
  • @RobinSalih but there are no such bilateral agreements to be found as far as I am aware. I think it's that the costs of enforcing customs duties and excise taxes on such small quantities are much greater than the amount of revenue that would be realized.
    – phoog
    Commented Jul 23, 2021 at 20:45
  • @phoog there are some countries that search every bag of every arriving passenger, yet still have duty free allowances. I don't know if it still happens, but Oman would take any VHS tape out of your luggage and watch it, and if need be censor any problematic content. This was quite laborious, so I don't see them allowing duty free to cut down red tape. Commented Jul 23, 2021 at 21:17

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