EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

Following the United Kingdom’s withdrawal from the European Union, this proposal reintroduces in the Excise Directive a former provision of Directive 92/12/EEC recognising the specific status of the Channel Fixed Link and the similarity of its situation with that of a port.

The proposal will restore a previous provision authorising the reopening of tax-free shops in the French terminal of the Channel Fixed Link, as is notably the case in the French ports of Calais and Dunkirk and in the British terminal of the Channel Fixed Link (Folkestone).

The Channel Fixed Link is a twin bored tunnel rail link, with an associated service tunnel, under the English Channel between Folkestone (Kent, United Kingdom) and Coquelles (Pas-de-Calais, France), and terminal areas for control of access to, and egress from, the tunnels. It has the characteristics of a maritime link with border controls at the two access terminals to the Channel Fixed Link.

Directive 92/12/EEC recognised the specific status of the Channel Fixed Link and likened its situation to that of a port as regards the regime of tax-free shops. This was motivated by the concern to take into account this new link between France and the United Kingdom in comparison to the ferries providing the sea link and thus to set a level playing field between the Channel Fixed Link and maritime links.

However, this provision was not carried over when tax-free sales between Member States were abolished in 1999 because the tax-free shops in question did not supply to passengers travelling outside of the Union’s fiscal territory.

Therefore, in accordance with the current rules under the Excise Directive, tax-free shops are only permitted in Union airports and ports for sales to passengers who have a destination outside of the Union’s fiscal territory. This is justified with a view to avoiding tax evasion and abuse.

On 31 December 2020, following the United Kingdom’s withdrawal from the European Union, the Channel Fixed Link became a cross-border link between the Union and a third country. As allowed by the Excise Directive, ferry companies reintroduced tax-free sales of goods supplied on board their ships during the sea-crossing to the United Kingdom. Tax-free shops have also opened in the ports of Calais and of Dunkirk. Moreover, the United Kingdom has already granted permission for an outlet at their terminal of the Channel Fixed Link in Folkestone. However, the French terminal of the Channel Fixed Link cannot open tax- free shops under the current rules.

The proposal intends to provide to travellers using the Channel Fixed Link from France to the United Kingdom tax-free facilities which are comparable to those available to persons travelling from a Member State to a third country by sea.

The passengers of the Channel Fixed Link are in the same position as sea passengers leaving the Union’s fiscal territory. Once the passengers of the Channel Fixed Link have checked in for their trip and entered the terminal with tax-free shops, they would be in a similar position as those passengers in a port in the sense that those passengers are bound to continue their trip to a third country.

The Channel Fixed Link terminal is not comparable to a railway terminal in that no train stops at this terminal but only shuttles which are only accessible to vehicles and not foot passengers. Passengers using the Channel Fixed Link cannot exit until they reach the destination. Therefore, the risk of non-compliance with the excise duty and tax free import allowances by travellers and consequently the control burden for the customs authorities would be limited and similar to persons travelling by boat or aircraft.

•Consistency with existing policy provisions in the policy area

According to the current rules, the situations in which tax-free sales to travellers leaving the territory of the Union are allowed is clearly determined with a view to avoiding tax evasion and abuse. The terminal of the Channel Fixed Link has the characteristics of a port and is linked directly to the port of Calais. Both infrastructures allow a sea-crossing under the same conditions.

The traveller’s destination is fixed to a third country and it is easier to check the quantity of tax-free goods the traveller has purchased. Thus, the risk of fraud, in particular the risk that passengers purchase tax-free goods without departing the Union is limited.

•Consistency with other Union policies

The measure is respectful of the proper functioning of the Single Market and the need to ensure fair competition. It will minimise the differential treatment between the Channel Fixed Link and the ports of Calais and Dunkirk and between its French terminal (Coquelles) and its British terminal (Folkestone), which could be considered as being in a similar legal and factual situation for the purposes of the Excise Directive. Moreover, the transport of passengers through the Channel Fixed Link is competing on the same relevant market as maritime transport. The reintroduction of the special status exclusively concerns the Channel Fixed Link in the French terminal (Coquelles) and not railway terminals. Given this, the measure will not lead to undue distortion of competition or hindering of the functioning of the Single Market.

2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY