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COM ( 83) 047 
 
 
 
Vol. 19 83/0017 
  
 
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COMMISSION  OF THE EUROPEAN  COMMUNITIES 
COM(83) 47 final 
Brussels,  4 February  1983 
REPORT FROM THE COMMISSION TO THE COUNCIL 
on tax-free  allowances  benefiting individuals 
(Position  at 1st  October 1982) 
COM(83) 47 final 

REPORT ON TAX-FREE  ALLOWANCES  BENEFITING INDIVIDUALS 
INDEX 
Page 
INTRODUCTION 1 
PART I - TRAVELLERS' TAX-FREE  ALLOWANCES 
CHAPTER I -  BACKGROUND  2 
CHAPTER II  -CURRENT  STATE OF  DEVELOPMENT  3 
- value allowances  6 
- quantitative allowances  8 
- remission  of tax on  exports  10 
- annual adjustment  of national currency equivalents  11 
CHAPTER III - EXPERIENCE,  DIFFICULTIES  AND SCOPE FOR 
IMPROVEMENT  OF THE COMMON  SYSTEM 12 
- the real value of allowances  and derogation 
value limits  13 
- national currency equivalents  of allowances  20 
- quantitative allowances  25 
- remission  of tax scheme 28 
- tax-free shops  29 
PART II - SMALL PARCELS OF A NON  COMMERCIAL  CHARACTER 
background  33 
current  state  of development  33 
future development  of the  system 36 
PART III  - CLEARANCE  PROCEDURES  APPLIED TO INDIVIDUALS 
38 
PART IV  - SUMMARY  OF MAIN CONCLUSIONS 41 

REPORT ON TAX-FREE  ALLOWANCES  BENEFITING  INDIVIDUALS 
INTRODUCTION 
1. The  Commission  has always attached considerable  importance  to the 
Community's  tax-free  allowances  which benefit private individuals. This 
concern is evidenced  by its constant efforts in past  years to establish 
common systems  in this field. The Commission  has also singled  but progress 
in the intra-Community  tax-free  allowance  field as a priority  in its 
programme  for 1982. The  European  Parliament  also has displayed great 
interest  in the development  of the common  tax-free  allowances  system and 
the Commission  has undertaken  to present to it this general report  on the 
operation  of the common system of tax-free  allowances  granted to individuals. 
In addition  to presenting the report  to the  Parliament,  the Commission  also 
addresses  it to the  Council and to  the Economic  and Social Committee. 
2. The aim of  this report is : 
a) to describe the system in current operation; 
b) to highlight  underdeveloped  areas and those giving  rise to difficulties  ; 
c) to examine  possible  improvement  to be made in the  system. 
The Commission's  earnest hope is that  this report  will provide a 
backdrop  for a stimulating  exchange  of views on the issues involved  between 
the Community  Institutions, the  Member  States and other parties  concerned, 
enabling further  real development  of the common  tax-free  allowances  system 
to take place and thus further  realization  of its objectives  . 
3. The  report covers  travellers'  tax-free  allowances  and tax-free  allo­
wances for small parcels  both in the intra-Community  and third country  con­
texts. The bulk of the  report is  taken up by the travellers'  allowances 
section. A summary of the main conclusions  is included at the end of the 
report. 

PART I - TRAVELLERS'  TAX FREE ALLOWANCES 
CHAPTER I - BACKGROUND 
4. A common system of  tax-free  allowances for  travellers  is in force. 
The relevant  Community  instruments are the Council  directives  on the 
harmonization of  provisions  laid down by law,  regulation  or administrative 
action relating  to exemption from turnover tax and excise duty on imports 
in international  travel  (l). A co-ordinated  text of these  directives  has 
"been published "by the  Commission  as a "booklet (2).  These directives  have 
"been supplemented "by the Council  Directive  8l/933/EEC  increasing  the third 
country allowances  (3), and most recently,  "by Council  Directive  82/443/SEC 
increasing  the intra-Community allowance from 1 January 1983 (4)· 
5. The "background against  which the common system of allowances for 
travellers  was orginally  proposed and discussed in  1968/69  was one in  which 
the customs  union was considered  virtually  achieved, the  elimination  of tax 
"borders was eagerly awaited and  economic  and monetary  union was viewed as 
a real prospect on the horizon.  Application  of a common system of  travellers' 
tax-free  allowances was viewed as  partial  abolition  of tax borders. 
Its primary goal was  political.  Creation of a  unified  system of  allo­
wances had an important impact on the ordinary  citizens  of the Community  by 
bringing  its existence  home to them in a tangible  way every time ihey  travelled. 
Vis-a-vis  third countries the  Community  presented a uniform treatment for 
arriving  travellers  thus again emphasizing its own  identity.  The main aim 
of the common system was to be achieved through the  creation  for travellers 
of conditions  similar to these obtaining on a domestic  market,  th.us ensuring 
the elimination  of cases of double  taxation  or nonr-taxation. 
6. Development  of the common  tax-free  allowances system has, in general, 
not been as rapid or complete as envisaged at the outset. This is  partly a 
result of the general slow  down in the progress  towards  economic  and mone­
tary union and the  emergence  of other  priorities.  It also stems partly from 
wide divergences in the  rates of indirect  tax applied  in the Member States 
(1) Directives  n° 69/169/EEC  (OJ n° L 133,  4.6.I969),  72/230/EEC  (OJ n° L 
139, 17.6.1972),  77/800/EEC  (OJ L 336,  27.12.1977),  78/1032/EEC  and 
78/1033/EEC  (JO n° L 366,  28.12.1978). 
(2) Reliefs  from taxes granted to imports  made by private  persons.  1979· 
3) OJ n° L 338,  25.11.81,  p. 24 
/]) OJ No L 206,  14.7.82  , p. 35 

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although it is not only  differing  rates of taxes  which contribute to  price 
differences  "between  Member States : distribution  cycles,  profit margins, 
consumer  tolerance are  also major contributors.  Lack of progress  stems 
also from the reluctance of the  Member  States to  tackle the general  problem 
of non-taxation, i.e. the  problem  of goods which, through a combination 
cf being sold tax-free in one  Member  State and being admitted tax-free  into 
another, enter  into home consumption  in the Community  completely  free of 
tax. 
CHAPTER II - CURRENT  STATE OP DSVELGHÆENT 
7. What  follows is a  summary  of the main aspects of the  Community's 
travellers'  tax-free allowances  system  as enacted at present, along with 
a commentary  on its  application  in the Member  States. 
The monetary  and quantitative  limits  currently  applied in the 
system are best  summarized  in tabular  form. 
Table I - Allowances subject to  maximum  values (l) 
(position  at 1 January  1982) 
General allowances for 
travellers within the Community 180 ECU (2) General allowances for 
travellers 
from third countries 45 ECU 
Optional 
Reduced allowances for 
travellers  under 15 
years old within the Community 50 ECU (2) Optional 
Reduced allowances for 
travellers  under 15 
years old from third countries 23 ECU 
(1) Up to 31  December  1981, Denmark  was allowed to apply an exclusion 
from the  relief where the unit value of  goods being imported by a 
traveller  exceeded  135 Ecu (IO5O Dkr). Ireland is allowed to apply 
a similar  exclusion up to 31  December  1983 in the case of  goods ex­
ceeding 77 Ecu (52 Irl) in  unit value. 
(2) 210 Ecu from 1 January 1983 for  all Member  States other than  Denmark 
which may continue to apply the 180 Ecu allowance up  until 31 December 
1983. The reduced allowance is to be increased to 60 Ecu. 

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8. Since the  institution  of the common  travellers'  allowances system, 
the general intra-Community allowance has evolved on the  following  pattern: 
from 75 TJA  (units of account) intra-Commuriity in 1969 to 125  UAon 1 July 1972 
and to 180 EUA (Ecu) on 1 January  1979· I"t will further  increase to 
210 Ecu on 1 January 1983. The general  third country allowance, having 
remained at 25 UA from 1969, was increased to 40 EUA (Ecu)on 1 January 1979 
and to 45 Ecu on 1 January 1982. 
TABLE II - Value allowances  applied  "by Member States 
(position  at 1 January 1982) 
Member State General allowance Reduced allowance  (where applied) 
Community Third country Community Third country 
Belgium BP 7.200 BP 1,800 BP 2,000 BP 900 
Denmark Dkr 1,400 Dkr 350 - -
Germany DM 460 DM 115 - -
Greece Dr 11,000 Dr 2,850 Dr 3,100 Dr 1,450 
Prance PP 1,030 PP 270 pp 290 PP 135 
Ireland in 120 Irl 31 Irl 34 Irl 16 
Italy (Lit 217,375) (Lit 56, 939) (Lit 63,265) (Lit 29,102) 
Luxemb ourg LP 7,200 LP 1,800 LP 2,000 LP 9OO 
Netherlands HF1 500 HF1 125 -
United UKL 120 UKL 28 
Kingdom UKL 120 
( ) = unrounded,  calculated  by the Commission  departments  owing to the 
lack of officially  fixed figures. 
Remarks: 
1. The Benelux countries operate a higher allowance of  10,000 PB/F1 or 
700 HP1 for persons  travelling  between  their countries on the  basis of 
the Treaty  establishing  the Benelux Union. 
2. Ireland  applies  a unit value limit of 52  Irl. to goods being imported 
under the allowances system in accordance with a  special  derogation in 
the directives. 

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Table III - Basic quantitative  allowances 
(position  at 1 January 1982) 
Product Travellers  within 
the Community Travellers  from 
third countries 
Tobacco-products 
cigarettes  or 300 200 
cigarillos  (cigars of a maximum 
weight of 3 g each) or 150 100 
cigars or 75 
smoking tobacco 400 g 250 g 
Alcoholic  beverages 
distilled  beverages  and spirits of 
an alcoholic strength  exceeding 
22° or to a total of 
1.5 litres 1 standard  bottle 
(0.70 to 1 litre) 
distilled  beverages  and spirits, 
and aperitifs  with a wine or alcohol 
base of an alcoholic strength  not 
exceeding  22 ; sparkling  wines, 
fortified  wines and 
still wines to a total of 
3 litres 
to a total of 
4 litres to a total of 
2 litres 
to a total of 
2 litres 
Perfumes and 75 g 50 g 
toilet waters 3/8 litre 1/4 litres 
Coffee or 750 g 500 g 
Coffee extracts  and essences 300 g 200 g 
Tea or 150 g 100 g 
tea extracts  and essences 
J 60 g 40 g 
REMARK; There are several qualifications  which apply  to the  allowances 
set out in  these tables e.g. the tobacco and alcohol allowances  are not 
granted to persons under  17 years of age. Details  are to be found in 
paragraphs  14 and 15  describing  the current system of quantitative  allowances 
in more detail. 

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Value allowances 
9. The  basic intra-Community allowance of 180  Ecu(l)applies  to goods con­
tained in the personal luggage of  travellers  coming from one  Member State 
to another  which : 
a) fulfil the conditions  laid down in Articles  9 and 10 of the Treaty 
(i.e. are in  free circulation  in the Community)  ; 
b) have been acquired subject to the general  rules governing  taxation  on 
the domestic  market of one of the  Member  Statesj 
c) have no commercial character. 
The taxes from  which relief is granted are value  added tax and excise  duties 
on imports. 
The unit value of  goods being imported is  indivisible  for the pur­
poses of applying the allowance. In other  words where a single item exceeds 
180 Ecu, no  relief is granted but  where several  items, which in total exceed 
180 Ecu, are imported,  relief is granted to those items  whose unit values 
added together do not exceed the allowance. j 
Where goods, such as  spirits  and tobacco,  which are subject to quanti­
tative restrictions  are imported by a  traveller,  their value is not to be 
reckoned in  calculation  of the 180 Ecu general allowance. 
A supplementary  condition  also attaches to the intra-Community 
allowance  which requires  a traveller  who, on his journey from one  Member 
State to another, has had access to a  third country  market or part of a 
Member State's  territory  (2) jnvfaich turnover tax or excise duty is not charged, 
to prove fulfilment  of the  acquisition  condition  at b) above and that the 
goods have not benefited  from a refund of tax or duty.  Where  this condition 
is not fulfilled  only the  third country allowance is granted. 
\ 
Member States may reduce the intra-Community allowance to 50 Ecu 
for travellers  under  15 years old.  Those Member States  availing  of this 
facility  can be  identified  in Table II  above. 
10. In order to  benefit  from the  third country allowance of 45 Ecu the 
only conditions are  that the goods be contained in the personal luggage of 
a traveller  coming  from a  third country and  that they have no commercial 
character.  The reduced allowance of 23 Ecu for  young travellers  is optional 
and the above comments  regarding  unit value apply to these allowances  also. 
11. It is  specified  in the  Directives  that the value of personal  effects 
being temporarily imported or  which had been temporarily exported are not to 
(T) The allowance of 180 Ecu  will be increased to  210Ecu with effect from 
I.I.I983  under the Council  directive  of 29 June  1982. 
(2) Heligoland or Greenland for  example. 

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be taken  into consideration  in application  of the  tax-free  allowances. 
This provision  is included  "because of the  fundamental  difference  "between 
these goods and those coming  within the scope of the  directives  ; the 
former are the  usual goods temporarily imported  or exported  by traveller 
going on, for example,  his holidays,  whereas  the latter are goods bought 
by the traveller  in one  country and permanently imported  into another. 
The origin of the  idea of personal  effects  being transported  by a traveller 
is found in international  conventions and, in  particular,  the New  York Con­
vention of 4 June 1954· 
12. The  directives  contain  some important  definitions.  First, importa­
tions are considered  as being without commercial character if they take 
place occasionally  and consist  only of goods for personal  or family use or 
for use as  gifts. Secondly, "personal luggage"  is defined as the whole of 
the luggage  which a traveller  submits,whether  on his arrival or later. 
Portable  fuel containers  are by  definition  not considered  as personal 
luggage although for each  vehicle  10 litres of fuel stored in such a con­
tainer may be imported duty-free subject  to safety regulations. 
13. The  directives  provide  that Member States may reduce the tax-free 
allowances  in the  case of frontier  zone residents,  frontier  zone workers 
or the crew of international  means of  transport.  In the  case of intra-
Community  travel, the minimum  allowances  are one  tenth of those applied 
to ordinary  travellers. 
These restricted  limits do not of  course apply  where the persons 
involved are not  engaged in "frontier  zone" travel as such unless they are 
importing  the goods in the  course of their vrork (the frontier  zone is the 
zone extending  15 km from the frontier  of a Member  State).  The usual 
allowances apply  in the  case of normal travel. 
All Member States  avail themselves  to a greater  or lesser extent 
of this possibility  to reduce the allowance  limit. 

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^uantitative  allowances 
14. Table III,  page 5 of this report shows that under the directives, 
different  quantitative  allowances apply depending  on whether the goods are 
being imported  by a traveller  coming from another  Member State or from a 
third country.  It should be noted, however,  that these common  limits do not 
prejudice  the relevant  national  provisions  concerning  travellers  whose 
residence  is outside Europe  (l), although  a provision  is included  which 
stipulates  that under no circumstances  may the  total quantity  of goods 
exempted  exceed the intra-Community  levels. 
15. The  several  restrictions  mentioned  in the  footnote  to Table III 
can be summarized  as follows. 
a) Restriction  on travellers  under 1*3 or 17  years of age 
The tax-free  allowance for tobacco products  and alcoholic 
beverages is  not granted to persons under 17 years of age. The allowance 
for coffee  is not granted to travellers  under 15 years of age. 
b) Restriction  on frontier  workers  and residents  and interHational  
crew members 
Member States may reduce the quantity  of the goods which may 
be admitted  dtity-free,  down to  one-tenth  of the  quantities  where the goods 
are imported from another  Member State by persons  resident  in the  frontier 
zone of the  importing  Member State or a neighbouring  Member State or by 
frontier  zone workers. 
However,  duty free entitlement  in respect of the goods listed 
below may be as  follows : 
i) Tobacco  products  : 
cigarettes  or 
cigarillos  (cigars  of a maximum  weight of 
3 g each) or 
cigars or . 
smoking tobacco 
ii) Alcoholic  beverages  : 
- distilled  beverages  and spirits^  of an 
alcoholic  strength exceeding  22 or O.25  litre 
- distilled  beverages  and spirits,  and aperitifs  with 
a wine or alcohol base of an alcoholic  strength  not 
exceeding  22 ; sparkling  wines,  fortified  wines and .... O.7O  litre 
- still wines O.5O  litre 
(l) This provision  is used by all Member  States to grant a higher  alloitfanoe  for 
cigarettes  to these travellers.  The allowance granted  is 400  cigarettes 
(or its equivalent)  instead of 200. 40 
20 
10 
50 g 

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Kember States  also may reduce  similarly  the allowance  limits for 
Members of the crew of a means of transport  used in  international  travel. 
Where the goods are being imported from a  third country by a 
frontier  zone worker or resident  or an international  crew member, Member 
States are free to reduce  their allowances as they wish. 
c) Restriction  on armed forces 
Member States may set lower  limits as to value and/or quantity of 
goods admitted  under the tax—free  allowances  when they are imported from 
another Member State by  members  of -the armed forces of a Member State,  inclu­
ding civilian  personnel and spouses and  dependent  children,  stationed  in 
another Member State. Belgium,  Germany,  Prance, Luxembourg,  Netherlands 
and the United.  Kingdom  avail themselves of  this facility. 
d) Restrictions  on gold, tobacco and  coffee 
Member States may exclude raw or  semi-finished  gold (including 
gold plate and the  like) from the  benefit  of the allowances. Only  Germany 
applies a restriction  under this provision. 
Also,in the case of  travellers  coming from third countries,  Member 
States have a general option to reduce the  quantities  of tobacco and  coffee 
allowed in under the tax-free  allowances.  Germany  avails  itself of this 
facility  to apply a 25O  g allowance for  coffee imported by such  travellers. 
e) Danish derogation on  quantitative  limits 
Denmark had particular  difficulties  in adopting the  Commtmity's 
allowances system and is allowed to apply  restrictions  to the  quantiative 
allowances granted to  "travellers  making  trips of short duration. 
The current  limits (l) which Denmark  applies  are summarized  in 
the following  table. 
Product Restricted  allowances  applied  to Danish 
residents  having stayed in another country  
less than 48 hours 
cigarettes  60 
or 
cigarillos  20 
or 
cigars 20 
or 
smoking tobacco  (grams)  100 
distilled  beverages  (litres)  none 
beer (litres)  2 
This derogation expires at the end of  1982. (2) 
(1) Directive  77/80P/EEC  - OJ n° L  336, 26.12.1977 
(2) On the 29 November  1982, the Commission  sent a proposal  to the Council 
for a phasing out of  the Danish derogation within  five years. The 
Council  adopted  this proposal  on 30 December  1982  (see paragraph  50 bis). 

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{Remission  of tax on  exports 
16. A significant  feature  of the common  tax-free allowances  system is 
the inclusion  of a scheme for regulation  of the  remission  of tax on  exports. 
One of the  basic principles  of the  system is the avoidance  of double 
taxation and non-taxation  of goods being imported  by travellers  in intra-
Community  travel. To operate  this, it is clear that where goods benefit 
from a tax-free allowance  on importation they should  not also benefit  from 
tax remission  on exportation in the country  from which the traveller  is 
coming. Vice-versa,  where they are  not entitled  to benefit  from a tax-free 
allowance  on importation  the goods should be able to benefit  from remission 
of tax in the country of exportation. 
This is the essence of the tax  remission provisions  of the common 
allowance  system.  Member  States are required  to take measures  to avoid 
remission  of tax on  goods being supplied,  to intra-Community  travellers  who 
benefit from the common  tax-free allowances.  On the other  hand, Member 
States are required  to set up a  system of remission  of turnover  tax on 
goods being exported  as part of the personal  luggage  of a traveller.  In 
the case of intra-Community  travellers  the remission  is only to be granted 
where the unit value of the  item exceeds  the 180 Ecu  limit*, in other words, 
where the item in question  cannot benefit  from the tax-free allowance  on 
importation  into another Member  State. Member  States are free to fix their' 
own conditions regarding remission  of tax  for third country residents  and 
also may exclude  their own residents  from the benefit of the scheme.  Practi­
cally all Member'  States avail of the  facility  to exclude  their own residents 
(as an anti-fraud  measure),  Luxembourg  and the Netherlands being the exceptions. 
17. The  control condition attaching  to remission is production  of the 
invoice (or another  document  in lieu) which, for third country  travellers, 
must bo endorsed  by the  customs  authorities  certifying  exportation,  and, 
for intra-Community  travellers,  must be endorsed  by the  customs or other 
authorities  certifying  final importation  into a Member  State. 
It should be noted that  no remission  may be  granted in respect of 
excise duty. 
77 Ecu for goods going to Ireland. 

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18. The  remission  of tax  scheme described  above was adopted by Council 
in 1978. At  that stage  some Member  States did  not operate such a scheme and 
the introduction  of one undoubtedly  posed serious  difficulties  for them. 
All Member  States now operate the common tare rer.isc-ion  scheme apart from 
Ireland whose legislation  on this matter is incompatible with  Community  re­
quirements  and will therefore  have to be adjusted. 
19. As  for the scheme as implemented  in the  eight (l) other  Member  States 
concerned  serious  shortcomings  have been observed.  The unit value limit 
above which tax remission should  be claimable is  the intra-Community  allowance 
limit,  180 Ecu* in the case cf exports to Member  States other than Ireland, 
for which a limit of 77 Ecu  operates.  Most Member  States do not  provide the 
lower limit required in the case  of goods being exported  by travellers  going 
to Ireland. Also creating  problems  are the various methods  of refund of tax. 
Some Member  States authorize  the traders involved  to make  refunds  directly 
without reference  to central  administration while others require  such a 
reference.  Clearly  such a centralised  authorization  system for individual 
payments can be cumbersome  and can  result in prolonged delays  in effecting 
the refund  of tax. 
Annual adjustment  of national currency equivalents 
20. One of the  main developments  of the common system which took place 
in 1978 was the  introduction  of an annual fixing of national currency 
equivalents  of the Ecu  expressed allowances. 
Each year Member  States arc  to calculate  their own currency equiva­
lents of the Ecu  allowances  by reference  to the  exchange  rate in force on 
first working  day of  October.  This newly calculated allowance is then  to 
apply for  the following calendar year.  However,  for administrative  ease, 
Member States have the option of maintaining the  existing  figure inhere the 
newly calculated  one varies by less than  5 $ from that calculated  the pre­
vious year.  In fixing their allowances in national currency  Member  States 
may round off within  a limit of the  equivalent  of 2 Ecu. 
(l) Greece is not obliged to introduce  the scheme until i± introduces  the 
common VAT system (i.e.  1 January  1984 at the  latest)  in accordance 
with Article  128 of and  Annex VIII to its Treaty  of Accession  to the 
EEC. 

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CHAPTER  III : EXPERIENCE,  DIFFICULTIES  AND SCOPE 
FOR IMPROVEMENT OP THE  COMMON SYSTEM 
21. One of  -the general reasons prompting  the Commission  to draw up 
this report is the  prolonged discussion  in Council on its proposals  for 
directives  in the  travellers'  allowances  field. In these discussions  the 
Council has shown itself  particularly  unwilling  to make the  effort to 
proceed with  the necessary  development  of the common system. 
The Commission's  proposal for  a Fifth Council  Directive  (l) on 
travellers  allowances  was the  subject of many  discussions  at the  various 
levels in the  Council over  a period of two and a  half years and has  only 
just "been adopted in a much  watered down form vis-a-vis  the Commission's 
and Parliament's  original  intentions.  Clearly,  the reasons "behind  this 
reluctance  on the  part of the  Council  to continue with  the logical and 
much needed development  of the  system need to he  analysed. 
22. Drawing  on experience  in the  operation  of the  system to date, this 
chapter discusses areas  of difficulty  and underdevelopment,  suggests  means 
for improving  the Community's  travellers'  allowances system  and considers 
its possible evolution  in the  future. 
Although there  is a degree of interaction  between  the various 
aspects of the  system and development  of one  area tends  to ha.ve repercussions 
or to depend on other areas,  this chapter  is divided  into five main sections 
to facilitate  the analysis.  These are : 
A. The  real value of allowances  and derogation value  limits. 
B. national  currency equivalents  of allowances. 
C. Qxiantitative  allowances. 
D. Remission  of tax  scheme. 
E. Tax-free  shops 
(l) O.J. No. C 318,  19.12.1979,  P. 5. 

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A. THE REAL VALUE OF ALLOWANCES 
23. The  current allowances (see Table I,  p. 4) for intra-Comraunity 
travel have been in force since  1 January  1979 and,  in accordance with the 
Council  decision  of 29 Jane  1982 (l),will be next increased  on 1 January  I983. 
Those for third countries  came into operation  on 1 January  1982. 
The date of 1 January  1979 is taken  as the  base date in  this report 
for purposes  of comparison  of real values.  Previously,  allowances  were 
expressed in  terms of the  unit of acco\tnt (UA)(which  reflected  exchange  rate 
parities  in operation  at the  date of inception  of the common  allowances 
system  1969).  This makes comparison with  the current  situation  difficult. 
The primary  purpose  of the  development  of the common  system which took 
place in 1978  > when the European  unit of account (EUA)  was introduced  into 
the directives,  was to  eliminate  the disparities  caused by the use of the UA. 
One of the  objectives  at the  time was to  maintain  the allowance  limits in 
all Member  States at least at their preceding  levels  in terms of national 
currencies. 
24. However,  no matter what the base date taken, it  is clear that, in 
recent j^ears, a significant  erosion  of the  value allowances  has taken place 
in real terms. Over the past three years  the average annual  Community  in­
crease in the  consumer  price index was more than  10  'Jo : 10.2 %  (1979)> 
1/1.1 %  (1980) and 12.6 % (1981). The  cumulative  effect  insofar  as intra-
Community  limits are concerned is that  at the end of 198I the common  values 
allowances  had fallen in real terras to 58 % of  those obtaining  on 1 January 
1979* recent  action  taken by the Council  to increase  the allowance  to 
210 Ecu  does tend to ease the situation.  However,  despite  this a considerable 
erosion has taken place,  particularly  when the implementation date  of 1 
January  1983 is borne in mind. In fact, an intra-Comraunity allowance  of 
approximately  280 Ecu  would be necessary  on 1 January  1983 in order  to 
restore the average purchasing  power of the 180 Ecu  allowance in operation 
on 1 January  1979* 
(1) Directive  82/443/ESC,  O.J. L 206,  14.7-82,  p. 35 

-14-
This type of  evolution  was foreseen by the  Commission  when it 
made its proposal for a  third Council  Directive  on travellers'  tax-free 
allowances in 1977 (1)· At that time the  Commission  proposed to adjust 
the allowances annually  itself in the  light of changes  in the  private  con­
sumption index for the  Community  and to  notify the new  levels  to Member 
States for implementation the  following  year. However  the Council  failed 
to include any  provision  for automatic or semi-automatic future increases 
in the allowances in the  directives  adopted in 1978. 
2^>. The  Commission  was given a  mandate  at the  relevant 
Council meeting to  carry out an annual examination of the operation of the 
intra-Community  tax-free  allowances system. Having  done so for 1979» the 
Commission  proposed an increase in the intra-Community allowance to 210 Ecu 
in its proposal for a :jth Council  directive  on travellers'  tax-free  allo­
wances (2). The  Commission  made this proposal in order to maintain (on 
1 January  I98O) the real value of the allowance set in 1978 and to achieve 
a modest  real increase. 
The European  Parliament, in its opinion on  this proposal (3),  called 
on the Commission  to be more ambitious and to propose a  programme  of in­
creases in the allowances over a  number  of years so that a  real step forward 
could be made. The Commission  proposed such a  programme  in its  amendments 
to the original  proposal. The idea was to achieve by 1982 an intra-Community 
value allowance of 300 Ecu. 
In discussions the Council has so far  rejected  the idea of 
a programme.  Discussion on the proposal for a ^th  directive  in Council 
simply centred on the  possibility  of increasing  the limit from 180 to 
210 Ecu, and, as mentioned  above,  the proposal has only now  been adopted 
for implementation on 1 January 1983 viz. three years  after the original 
date envisaged by the  Commission. 
26. Despite the  efforts  of the  Commission,  the Parliament, and the 
Economic  and Social Committee,  the lack of political  will on the part of 
the Council is manifest and, indeed, discouraging. The  Commission  is well 
anare of 1he  difficulties  and problems  experienced by  Member States and addresses 
(1) O.J. n° C 31,  8.2.1977,  P. 5 
(2) O.J. nc C 318,  19.12.1979,  p. 5 
(3) O.J. n° C 117,  12.5.80,  83 

•Vy 
itself to these subsequently  inthis  report.  However,  it is seriously disturbed 
by the Council's neglect  of the  Community  system of tax-free allowances 
system in this regard and expresses  the wish that  a renewal  of political 
motivation  be found and development  of the  system allowed  to progress.  At 
this stage it  would be opportune  to examine  in some  detail the actual 
reasons  for the Council's reluctance  to progress.  What are the  concerns 
of the Member  States which lead them to refuse to allow the system develop 
as desired  by the  Commission  and the  Parliament  ? 
27. Some  Member  States p\it forward  as their primary  concern  the loss 
of revenue  through  erosion  of the tax  base resulting  from imports  by 
travellers  displacing  normal domestic  sales. Member  States with high  levels 
of indirect  taxes fear  the exploitation  by travellers  cf the  allowances 
system in order to buy  goods, which are heavily taxed  in their own country, 
in Member  States with lower  levels of indirect  taxes. They also fear that 
high allowances lead  to travellers  undertaking  their journey for  the sole 
purpose of achieving  a tax  saving on the  items bought  abroad and to buy 
certain types of consumer  goods not, in the  normal way, carried  by travellers 
(e.g. domestic  appliances). 
The Commission  is sensitive  to the Member  States'  concerns  regarding 
erosion of revenue,  particulary  in current economic  circumstances.  But 
price differences  do not  result  solely  from differing  tax rates. Differences 
in many other factors,  such as profit margins,  intensity  of competition, 
distribution/manufacturing  cycles can result in wide differences  in price 
independent  of tax  rates. In regard to these elements,  allowing  a traveller 
to buy in the  country with lower prices  is economically  advantageous  as it 
exercises  a downward  pressure  on price levels  generally  and thus combats 
inflation.  Member  States'  problems  must also be seen in the  overall  con­
text of the  development  of the  internal  market,  in which the allowances 
system plays a significant  rale. In such a global  approach  there is,  as 
often as not, a swings and roundabouts  situation  with regard  to purchases 
made by travellers.  Particular  Member  States are attractive  to travellers 
for purchases  of particular  goods but, in general, there is  a two way  flow 
and it is rare that  a single Member  State maintains  an advantage  in respect 
of all goods. 

-16-
In addition it should  be stressed that  such problems  as may  arise, 
tend to be  transitory.  Changes  in tax  rates, in currency  exchange  rates 
and in the  relative  cost of living commonly  lead to alteration  of travellers' 
preferences for  purchases  so that a Member  State or a particular  area with 
a trade displacement  problem  can often find itself in the  inverse  situation 
with a net  trade outflow  shortly  afterwards. 
28. Another  argument  advanced  by certain  Member  States against increases 
in the value allowances  concerns  the supposed  adequacy  of the  existing 
allowances.  It is  suggested  that the intra-Community  limit of 180 Ecu 
is already  sufficiently  high to cover the needs of most, if not all travellers 
The Commission  doubts the adequacy  of the  existing  intra-Community  allowances 
in the context of a common  market and would point out that it  is very quickly 
reached in the  case of a traveller  importing, for  example,  a suit of clothes 
and a pair of shoes bought  while abroad  in another  Member  State. On the 
general point  of the  adequacy  of the  limit level,  it has been pointed out 
earlier in this chapter  (see paragraph  24) that a serious erosion  of the 
real value of the  allowance  has been allowed  to take place. 
Clearly,  such an erosion should  not have been permitted*  Nor 
should the Community  be content with simple  maintenance  of real values of 
allowances. Rather,  the aims already enshrined  in Community  legislation 
that travel between  Member States shouHbe  facilitated  by increases  in allo­
wances and that exemption  benefiting  individuals  should be progressively 
extended  (l) are those which should be pursued  in this context. 
29· Member  States also invoke  as a reason for  not increasing  the general 
intra-Community  value allowance  the continued existence  of tax-free 
shops: they explain  their  reluctance  to increase  the allowance  on the 
grounds  that the goods being imported tax-free  by travellers  may have been 
acquired  totally  tax-free  in one of  these shops. 
(l) cf. Council  Directive  78/IO32/EEC, O.J. L 366, 28.12.1978 and  Council 
Resolution  of 22 March 1971 °n  economic  and monetary  union, 0".J.  C 28 
of 27.3.1971. 

-17-
Th e Commission  cannot accept  this as an argument  for not  increasing 
allowances,  particularly  as the hulk of  tax-free  sales is accounted for by 
sales of alcoholic  drinks and tobacco. The  major  interest  of both operator 
and traveller  is in them. The Commission,  recognizing  this interest 
and the  generally  wide divergence in the tax treatment of these  goods 
throughout the  Community,  has not in  fact proposed any increase in the 
quantitative  allowances for these  goods since the establishment of the 
common system in  1969· Consequently it  would contend that the  tax-free 
shop aspect does not represent a  real obstacle to a general increase in 
value allowances. 

-18-
30. The  Commission  recognizes  -that, at the current stage  of development, 
automatic adjustment  of value allowances is  not acceptable  to the Member 
States. But it cannot accept  the situation  that has arisen following  the 
Council's  tardiness in adopting  the fifth Council  Directive  on travellers' 
allowances  and the  inadequacy  of the  provisions  therein.  It is in  favour 
of a regular increase  in the  allowance  levels and to  this end proposes 
that the Council plans  the development  of the  intra-Community allowances 
some years in  advance.  Increases should  be determined  on two  bases : 
the need to maintain purchasing  power and the  need to continue with  the 
development  of the  system. This approach is  the same as the  pluriannual 
programme,  favoured  by the  Parliament  in its opinion  on the  proposal for 
a fifth directive  on travellers'  allowances (see paragraph  25) and 
subsequently adopted  by the  Commission. 
31. The  Commission  services  have also considered  the problem of the 
maintenance  of real values from  the viewpoint  of purchasing  power parities 
(PPP). There  is a Community  measure  of these : the  purchasing  power stan­
dard. This  measure  is used  to make  comparisons  in real terms between 
purchasing  powers in the Member  States.  The Commission's  Statistical  Office 
calculates  and publishes these data  on an annual  basis.  Therefore  a suit­
able vehicle  exists  for translating  a given allowance  into national  currency 
levels that reflect  the varying average  price levels in the Member  States. 
Vihat advantage  would this have ? Basically,  it would result  in allowances 
which would,  in terms ofa national  currency,  be pitched  at levels which 
realistically  reflected  the price levels  obtaining  on the  domestic  market 
of the relevant  Member  State. It would also have the advantage  of auto­
matically  reflecting  price changes  at national  level on an annual  basis. 
However,  the disadvantages  would be manifold.  First,  reflection 
of national  price levels in an allowance  applied  at importation is  not 
logical. The purchases involved  have necessarily  been made abroad and so 
it seems more appropriate that  price levels in the  other Member  States be 
reflected  in the  allowance  applied  by a given Member  State. Also,  application 
of a PPP  factor would effectively  destroy  the unity of the common allowances 

-19-
which aro currently  directly  comparable  from one national currency to 
another.  Such a system  would cau?e confusion  among the travelling  public. 
Finally,  there would be untold administrative  difficulty  in relation  to the 
tax remission  scheme,  as each Member  State would have to apply a  different 
tax remission  limit depending  on the destination of the  traveller,  giving 
a minimum  of nine possible remission  levels. 
Consequently, the examination has led the  Commission  to the con­
clusion  that application  of a PPP  based factor to the value allowance  would 
not be a viable  solution  to the problem  of maintenance  of real values and 
would result  in complicating a  system  specifically  designed to be simple in 
order to minimise border controls. 
Derogation  from value allowance 
32. Ireland's unit value derogation (sec footnote to Table I,  page /]) 
was agreed  because  of that  Member  State's  particularly  serious  problems  in 
adopting the  common  allowance  fixed in 1978« This derogation expires at 
the end of 1983· A  similar  derogation permitted  Denmark  not to grant the 
tax-free  allowance to  goods exceeding 135 Ecu.  However,  this expired on 
31 December  I98I and Denmark  now applies the  normal  allowance of 180 FJCU 
without  restriction  (l) . 
It is clear that any  measure  taken to  ease particular  problems  being 
experienced by a  Member  State automatically  reduces  the need for a special 
derogation. Also, the evolution of the general  economic  situation  has 
generally  lessened, and in  relation  to some goods,  totally  eliminated the 
need for a special  derogation for Ireland. 
On a practical  level,  the existence of a  special  limit creates  con­
fusion among  travellers  and administrative  difficulties  particularly  in 
respect of the  common  scheme  for remission of tax on exports. 
33· For these reasons, the  Commission  looks forward to the expiry of 
the derogation on 1 January 1984  when a uniform allowance can  once again 
apply throughout  the Community. 
(l) It should be noted that, by derogation  from the recently  adopted  210 
Ecu intra—Community  allowance,  Denmark  may continue to apply the 
180 Ecu allowance during 1983 (see footnote (2), p. 3). 

-20-
Third country allowances 
34« The  above comments  are essentially  confined to the  intra-Community 
allowance. The question of increases in the  third, country allowances is 
obviously closely linked with action on the  Community's  customs  duty-free 
allowances and with international obligations. Also, a  particular  problem 
arises for countries bordering the  Community. 
35· Recent  increases in the value of the US  dollar mean that the • 
Community's  third country allowance no longer respects its obligations with­
in Customs  Co-operation Council (CGC) to grant an allowance of f, 50 to 
travellers  from contracting countries.  Many other countries are  presumably 
in the same position and it  seems that a solution  would best be  found with­
in the CCC  framework,  rather  than through  unilateral  action on the part of 
Community. 
36. In  view of the  particular  geographic  and socio-economic  ties which 
exist between  the Community  and several neighbouring countries, it  would 
perhaps  be advisable to consider special  treatment  under the allowances 
system for these countries. The  Commission  favours  opening  discussions with 
the neighbouring countries  concerned  on means to improve  the situation 
relating  to cross  border  control of  travellers  between  it and these countries. 
Such a move was requested by the Parliament in its previously  mentioned 
opinion on the  Commission's  proposal for a  fifth Council Directive on 
travellers'  allowances.  These  negotiations  would have to be joint customs/ 
tax ones and, of course, the  Commission  would require a  mandate  from the 
Council to  embark upon them. 
37« In  relation  to third country allowances in general, the Council, 
acting on a proposal  from the Commission,  has recently  adopted  a directive 
increasing  these allowances by a small  amount  with effect  from 1 January 
1982 (l). The aim of these increases was not to achieve  real increases but 
simply to avoid reductions in national  etirrencies  because  of currency 
fluctuations.  A full Oiscussion on  this problem  is found in the following 
section  of the report. 
B. NATIONAL  CURRENCY  EQUIVALENTS  OF ALLOWANCES 
38. The  system  of adjustment  of national currency equivalents of  Commu­
nity allowances described in  paragraph  20, is common  to all directives 
(1) Directive  Ol/933/EEC,  O.J. L 338,  25.11.81,  p. 24. 

-21-
containing  values allcwancea expressed in Ecu. Consequently the  comments  -inihis 
section are applicable in  all cases, and in  particular  to the tax—free 
allowances for  travellers  as well as those for small consignments. 
39= The objective of the system is to maintain  strict equivalence 
between  the allowances expressed in  national currencies,in  order to avoid 
cases of double taxation or non-taxation such as  existed  in the  intra-
Community  system  with the previous  unit of account (UA)  based system. 
Prior to 1978» the UA allowances  expressed  in terms of Member  States' 
eurrenciae  were calculated on the old fixed  gold, parities  declared  to the 
International  Monetary  Fund in. 1971•Thus,while  a common  level of  allowance  exis­
ted in UA  terms,  the concordance  was destroyed  when the allowances  were trans­
lated into national  currencies. The  introduction  of the European  Unit of 
Account  (subsequently replaced by the Ecu or  European  currency unit),basedona 
basket of  European  currencies and the expression of allowance  limits  in 
terms of it enabled  realistic  parities to be re-introduced  into the tax-free 
allowances system. 
Ideally,  allowances expressed in  terms of national  currency should 
be allowed to  float on a daily basis to ensure  their strict  equivalence. This 
is clearly  impractical  from an administrative viewpoint and the  solution 
adopted - annual adjustment -  much more satisfactory.  To further  facilitate 
administration,  Member  States may round the  limits  in national  currency 
terms and need not adjust if the  fluctuation  from one year to the next is 
less than 5 %· 
40. As  mentioned  above the main concern of  this system of adjustment 
is to avoid cases of double taxation or non-taxation. Consider the case 
of a Member  State ("A")  whose  currency during the course of a year appre­
ciates strongly  vis-a-vis  the currency of another  Member  State ("B"). 
At the beginning of the year, a  traveller  can buy  goods in Member  State A 
to a value of, say, A 100 (being taken as the equivalent of 180 Ecu) and 
import thern tax-free  into Member  State B  where a limit of, say, B 1,000 
applies.  If he bought goods valued at  more than A 100 he could obtain tax 
remission  on export and  would be charged tax on entry  into B as the  goods 
would be valued at  more tlian B 1,000. 
However,  problems  may arise where during the course of the year 
the situation  evolves so that A 80 = l80 Ecu = B  1,000,  but A's allowance 
level remains  at A 100. A  traveller  buys goods of unit value A 90 which, 

22 
being below the allowance  limit in A do not  qualify  for tax remission  on 
exportation.  However  on entry into B the goods which,at  the current ex­
change rate are valued at B 1,125,are  above B's limit of B 1,000 and do 
not qualify  for tax-free importation.  The result,  double  taxation. 
Similarly  non-taxation could  in theory occur, although  the condition  re­
lating to acquisition  subject  to general  rules governing taxation  and the 
requirement  to have the relevant  document  endorsed  by customs  of the 
Member State of importation  (see description  of tax  remission  scheme — 
paragraph  17 ) should combine  to avoid this in practice. 
41. Before continuing with  an analysis  of the  operation  of this currency 
adjustment  mechanism  to date it should  be recalled  that the entry in the 
Council minutes  already  referred  to in  paragraph  25, which requires  the 
Commission  to carry out an  annual examination  of the  operation  of the  tax-
free allowances system, also  calls on the  Commission  to submit proposals 
to ensure,  in particular,  that the intra-Community  exemptions  do not  diminish 
in terms of national  currency.  The idea was that no Community  citizens, 
whatever  their country, should  see allowances being reduced  in terms of their 
own currency  as a result of the  operation  of a Community  mechanism  as this 
would engender  negative  feelings  against  the Community. 
42. What has  experience  of the  operation  of the  adjustment  mechanism 
shown ? Most Member  States have made use of the  possibility  of rounding  the 
sums in their national  currencies.  The Italian  situation  is not  clear as 
the allowance  limits do not  appear to have been converted  officially  into 
the national  currency. Also, in  the three adjustments  to date, Member States 
which were not obliged  to adjust, being  within the 5 '/° tolerance, did notcbso. 
No adjustment  was obligatory  when the  calculations  for I98O were made. When 
the I98I allowances  were set two Member  States  (Italy and Denmark)  were 
obliged to increase  their allowances  and the  United Kingdom  was obliged  to 
reduce its allowances.  No new  adjustments  were dictated  by the 1982  exercise. 
43« In  fixing the 198I  levels, the question  of non-reduction  of the  allo­
wances in national  currency  terms came into play. The United Kingdom  did 
not wish  to reduce its allowance  and the  Commission  shared the view that  this 
would be politically  undesirable.  In relation  to the  intra-Community  allo­
wance there was a proposal already  on the  table to increase  the allowance 
in Ecu terms by an amount  sufficient  to offset the required reduction  in 
the U.K. As  far as the  other allowances  were concerned, the  Commission 

-23-
promptly  proposed  increases  sufficient  to offset  the reduction  which were 
subsequently  adopted  by Council (see  paragraph  4). 
44· The  Commission  has long held the  view that from a political  and 
psychological  angle, reductions in  terms of national currencies should not 
be countenanced.  Until  now it has  felt support for  this view by the Member 
States in Council.  Indeed,  the Council manifested  this support in the 
minutes  of its  meeting when it adopted  the third Council  directive  on 
travellers'  allowances in 1978,  when it undertook  to act  promptly  on pro­
posals from the Commission  aimed at avoiding reductions of allowances in 
national  terms.  The Commission  considers that, in order to avoid lengthy 
and often  unfruitful  discussions, that a  simplified  decision  making  proce­
dure should be established to  enact common  allowances  sufficient  to offset 
reductions (1).  Such a procedure  would eliminate one of the  major drawbacks 
of the current  situation  which is the  time factor.  The date for establishing 
exchange  rates for the  fixing  of national currency equivalents of the allow­
ances is the  first working  day of  October  of the year preceding that in 
which the allowance is to apply. So there is a  three-month  lag between  the 
establishment of the national currency equivalents and  their  application. 
If a reduction of the allowance in a national currency 13.noted, an  amending 
directive  is necessary  which,  with consultation of the Parliament and the 
Economic  and Social  Committee,  would require an absolute  minimum  of 6 months 
from date of inception to application by the  Member  States and a  more normal 
time scale of 9  months.  This leaves a 3 to 6  months  period during  which the 
allowance should  legally  be reduced  in national currency  terms by the Member 
State concerned  only to be increased  shortly  afterwards or during  which the 
Member State does not reduce  in infraction  of the  directive,  giving  rise to 
the potential  double  or non-taxation described  above. 
45· In order to eliminate  this undesirable feature the  Commission  envisages 
a semi-automatic  system  of adjustment.  It is  proposed  that the Council em­
power the Commission  to operate a  system  on the following  lines for intra-
Community  allowances: 
(l) See point 34 of the  Commission's  programme  for the  simplification  of 
value added tax procedures  and formalities  in intra-Community  trade. 
O.J. C 244,  24.9.81,  p. 4. 

-24-
The Commission  would calculate,  on the basis of the  exchange  rates 
in force on 1st  October,  whether  or not any Member  States would be 
required to reduce  its allowances in  national  currency terms.  The 
Commission  would then notify Member States as to whether an adjustment 
was necessary  or not and  proceed by decision  to adopt a new allowance  at 
a level high enough to avoid the foreseen  reduction  or reductions. 
This decision  would be taken before  1st November,  published  officially, 
and notified  to the Member  States, the Council and Parliament.  Member 
States would have one month in which  to request if necessary,  that the 
matter be discussed  in Council.  Where a  discussion  was requested,  this 
would have to be held as soon as possible  and the  Council would be 
enabled to overturn  the Commission's  decision.  In the event  of such an 
overturn the Council would be required  to give the Commission  guidelines 
on the on the  measures  which it considered necessary  to cater for the then 
current situation. 
46. A further  problem in relation  to the  fixing of national  currency 
equivalents  of Ecu  limits arises when there is  a re-adjustment  of parities 
within the European Monetary  System (EMS) after the annual fixing of 
the allowances  . 
On the question  of principle,  the Commission's  attitude  is the same 
as for the annual adjustment  exercise;  it considers  that reductions  of 
allowances in  national  terms should  not be countenanced  and the comments 
made above in this respect  apply mutatis mutandis.  From the procedural 
angle the problem  is, of course,  different.  If significant  changes  in 
parities were to occur overnight with  a re-adjustment  in the EMS,  there 
would be a need to respond  quickly and the  Commission  would propose the 
application,  immediately  after any such re-adjustment,  of a semi-automatic 
system of increases  in Ecu  allowance  levels,  if necessary,  on the  lines 
described  in paragraph  45 above. 

-25-
G. QUANTITATIVE  ALLOWANCES 
47· The  travellers'  allowances system provides for  quantitative 
limits to be applied  to tobacco products,  alcoholic  drinks,  perfumes  and 
toilet waters, coffee and tea to take account, in  particular,  of the 
significant  difference  in the excise duty rates  applied  to these  goods 
in the various  Member  States.  Development  of the duties in question de­
pends on the economic  and budgetary  policy  of the Member  States concerned, 
which often  results  in increasing  tax divergences and widening  price 
differences. 
48. On the harmonization  front,  the Community  will at some time 
establish,  as provided in the  Commission's  1972 proposal  (l), the same 
excises in all Member  States. In  addition,  if neutrality  of competition 
is to be ensured the  structures  of these excises  need to be harmonized. 
Finally, some convergence of excise rates is  also considered  essential  in 
the context of the general longer term  development  of the Community. 
Clearly,  once excise rates  were firmly  set on a convergent trend,  signi­
ficant increases in  quantitative  allowances could be  implemented  without 
the risk of disruption  and this remains the  Commission's  long term  objective 
In the shorter term, in view of the  revenue  importance of the tobacco and 
drink excises the  Commission  considers, that the  quant  itiative  allowances 
for the main excise goods cannot be increased across the board so long as 
present divergences in excise rates  persist.  However,  it is considered 
that progress should be  made on the wine allowance (see paragraph 53  below) 
and the allowances for coffee and tea (paragraph 5l)> independently of 
harmonization of excise  rates. 
Danish derogation 
49. Annex  VII, Part V (Taxation) of the Act of Accession to the 
European  Communities  of the Kingdom  of Denmark,  Ireland  and the United 
Kingdom  of Great  Britain  and Northern  Ireland  authorised  Denmark,  until 
31 December  19713» "to exclude from the tax allowances  relating  to turnover 
taxes and excises  applicable  in international  passenger  travel,  the 
following  goods: 
(l) On 7 March  1972, the  Commission  sent to Council a proposal for a 
directive  on excise duties and  indirect  taxes, other than value  added 
tax, which are  levied  directly  or indirectly  on the consumption of 
products (OJ no C 43,  29«4»72).  This proposal remains before the Council 

-26-
- tobacco  products; 
- distilled  beverages  and spirits,  of an alcoholic strength  exceeding 
22 % vol ; 
- beer, only for quantitites  exceeding  2 litres. 
The need for this derogation  arose from considerable differences in 
the excise rates applied to  these goods in Denmark  and Germany. 
On the expiration of  this period, in  accordance  with paragraph  1 (c) 
of part V of the  Annex concerned,  the Council prolonged the authorisation 
on two occasions  (l), first until  31 December  1976 and  then  31 December  1977· 
The Danish  Government  subsequently requested a further period in 
order fully to adapt to the Community  system  of allowances. In contrast to 
the two previous derogations,  which were limited  to one year, the Council, 
on 19 December  1977» adopted  a Directive granting a further derogation to 
Denmark  until  31 December  1982 (2). This derogation,  which allows Denmark 
to apply the  restrictions  summarized  in paragraph  15 (e) above to travellers 
making trips of short duration, provides for a progressive  alignment  of the 
Danish system  with the  Community  rules.  In accordance  with these provisions 
the restictions  applicable to non-residents of  Denmark  were abolished  from 
1 January  198O and the quantity of cigarettes admitted for  Danish  residents 
was increased  from  40 to 60 on 1  January  1982. Also the  minimum  period for 
the application of the  restriction,  expressed  in terms of the length of stay 
of the traveller  abroad,  was reduced  in Denmark  under the terms of the 
derogation  from  72 to 48  hours  on 1 January  198I. 
50. When  the directive  granting the derogation was  adopted,  the Commission 
undertook  to draw up each year, starting  in 1978, a report on evolution of 
the prices of alcoholic drinks and  tobacco  products in  Denmark  and Germany, 
on the evolution of fares for  travellers  in Denmark,  and on the  fiscal  po­
licy of the  Danish  Government.  Five such reports  have been prepared  to date. 
While the first four reports  showed  little  ar no reduction in price  differen­
tials between  Denmark  and Germany  during the  first four years of the derogation, 
the fifth report, covering the period  from September  1981 to  June  1982, notes 
substantial  reductions in  retail price gaps between  the countries. Tax  level 
differences  have also been reduced  during  this latter  period, although pro­
jected increases in  Danish  excise duties  will offset  this movement  to some 
extent. Also  particularly  for expensive  alcoholic drinks, the  mixed  specific/ 
ad valorem  excise on alcohol continues to  have a negative influence. 
(1) Directive  76/134/EEC  of 20.1.1976  (0J no L 21 of  29.1.1976); 
Directive  77/72/EEC  of 18.1.1977  (0J no L 23 of  27.1.1977) 
(2) Directive  77/800/EEC  of 19.12.1977  (0J no L 336 of  27.12.1977) 

26 a 
50 bis. On 29  November  1982 the Commission,  on a request from the Danish 
Government,  sent a proposal to the Council for a phasing out of the Danish 
derogation  within  five years. The proposal  offered  the Danes a period of two 
years with only very  modest  alignments on products for which the Danish and 
German  retail prices  are very  much the same. After three years  all these 
products should be in  line with the  Community  rules. For the  more sensitive 
products,  such as  cigarettes  and spirits,  a phasing out is proposed to take 
place in the  last three years of the  five years derogation period. Due to 
the difficult  economic  situation  in Denmark  it was further  proposed that 
after one and a  half years - in the  light of the prospects of the Danish 
economy  at that time  - the time-table can be re-examined if  need be. On 
30 December  1982 the Council adopted  this proposal with  some minor modi­
fications.  CD 
(1) Directive  83/2/EEC  of 30.12.1982  (O.J. L  12 of 14.1.1983,  p. 48) 

27 
Coffee and Tea 
51· The  amended  proposal for  a fifth Council  Directive  on travellers' 
allowances,  referred  to in  paragraph  25, provided for increases  in, and eventual 
abolition  (from 1 January 1982) of, the quantitative  limits on tea and 
coffee. The excise duties  on these goods are, in general,  minor in terms 
of revenue  and are  only applied  by certain  of the Member  States. 
Unfortunately,  it must be recorded  yet again that  the Council  failed 
to adopt this aspect of the  proposal, thus  making a eventual decision  on 
these matters  more difficult  as Belgium has recently  been added to those 
Member States  which levy a duty on coffee. 
52. However,  this does not reduce the argument  that, besides  the fact 
that the excise duties  on coffee and tea arc  levied only by five and three 
Member States  respectively,  the budgetary  consequents  of the  abolition  of 
the travellers'  quantitative allowance for these  goods could only  be of 
minimal  significance.  Furthermore  since these  are products  coming  from 
developing countries,  the maintenance  of these restrictions  runs counter 
to the resolution  of 18 September  1970 of the  United Nations Council  on 
Trade and Development  (UITCTAD)  since the existing  allowances  can hardly en­
courage the consumption  of these goods. 
Wine 
53. The initial  traveller's  allowance  directive  of 28 May 1969 fixed 
the tax-free allowance  for  still wine at 2 litres for intra-Cornmunity 
travellers.  This  limit has since been increased  on 2 occasions  : first in 
1972 to 3 litres and subsequently  in 1978 to 4 litres (although  Denmark  was 
allowed to retain tho 3 litre limit  until 31 December  1983). 
Besides general considerations  in favour of increasing tax-free 
allowances,  the Commission  favoured  in particular  an increase  in the  wine 
limit in order to encourage  consumption  of wine in the  Community  and to 
respond to the  wishes of the  Parliament, expressed  in its opinion  on the 
Commission's  proposal for  a fifth Council  Directive  on traveller's  allo­
wances.  Accordingly,  in iti; amendments  to this proposal it  proposed  a 
5 litre intra-Community  allowance  (4 litres for Denmark).  This aspect  of 
the proposal  was also not adopted. 

-AA-
In this regard, the  difficulties  caused  by the  level of wine taxes 
in Denmark  are not without relevance and contribute to a  major extent to 
its reluctance to increase the  wine limit. Once again the excise rate 
relative  to that in  Germany  is the determining factor as the  latter  country 
applies  no excise  diities  at all to  still wines. 
Tobacco 
54* It was  mentioned  earlier  (paragraph 14) that the  Community  quanti­
tative limits  applied without prejudice to the relevant, national provisions 
concerning  travellers  whose residence was outside  Europe.  This provision 
was included to take  account  of the Community's  customs  legislation  on 
duty-free allowances  which provides for a higher  tobacco  limit for travelle 
whose residence is outside  Europe  (400 as  opposed  to 200 cigarettes (l). 
However,  as pointed o\vt previously, a clause was included,  stipulating  that 
no more favourable allowances  than those applied in  intra-Community  travel 
should be grated in any case. Currently the  intra-Community  allowance is 
300 cigarettes. 
Historically,  this higher cigarette allowance was granted by  some 
Member States on the basis of an  OECD Council decision of 20 July 1965 
concerning administrative  facilities  in favour of international tourism, 
and was incorporated  into the Community  customs  scheme  for duty-free 
allowances for  travellers.  The situation  has, of course, now  changed 
somewhat  and the  Commission  has difficulty  in finding  a continued  justifi­
cation for this measure.  Also, it is of the opinion that the notion of 
Community  preference requires  Member  States not to accord a higher  allo­
wances to third country residents  than to their own citizens. 
D. RllIISSIOIT OP TAX  SCHEME 
55. As described  earlier,  the remission of tax  scheme  requires control 
to be effected by  endorsement  of the invoice or other  document  in lieu 
thereof. Some Member  States are content to control simply by the invoice 
while others require special  forms which must be obtained in addition to 
the invoice  when the goods are bought,  thus complicating the operation of 
the scheme.  The scheme  as applied in the  Member  States has also  been 
criticised  because  cf its general administrative complexity and the long 
delay in  actually  obtaining  repayment  cf the tax involved.  Some Member 
(l) Regulation  1.544/69  - OJ L 191 of  5.8.1969 

-29-
States allow  the trader to refund the tax whereas  others process 
the applications  centrally. 
Clearly,  therefore  nore uniformity could  ho introduced  and 
improvements  made to the  system. 
56. Uith  a view to reducing  the administrative complexity  of the 
scheme and shortening  the repayment  delays mentioned  above the trader 
himself could  be allowed, at the  minimum  to process  applications  for refunds 
from travellers  without reference  to the  autliorities  and make the  repayment 
in all cases 'where a relatively  small sum of tax is  involved. This  sum 
should be fixed at a common  level by the  directives.  Furthermore  a maximum 
time delay for refund  of the tax  should be incorporated  in Community  legis­
lation. This could  be set at,  for example,  3 months,  to be exceeded  only 
in a case where documentation  is incomplete  or force majeure  intervenes. 
Such a provision  would eliminate  the sometimes  embarrassingly long  time 
delays which have come to the  notice of the  Commission. 
57· Also there is  a problem  of marginality  in the  operation  of the 
remission  scheme and the  tax-free allowances  system.  Double  taxation could 
occur whore a ti^voiler  is refused tax remission  in the  case of an item 
which is marginally  under the tax-free allowance  limit in the Member  State 
of exportation. This  oocurs where on importation  into another  Member  State 
the item  does not qualify  for tax exemption  as it marginally  exceeds  the 
allowance  level as laid down in the  latter Member  State's currency. This 
could happen  because  of the  rounding  facility  granted  to Member  States when 
fixing the allowances (and  hence tax remission  limits)  in national currencies. 
Given the impracticability  of arranging  matters  in the  country of exportation 
after theiraveller  has left the country,  the most satisfactory  solution  would 
appear to be for the authorities  of the Member  State of importation  to have 
a flexible  attitude  and to  allow the item in question  to be imported tax-
free when it is established that it  has borne tax in the  country of origin. 
E. TAX-FREE SHOPS 
58. Tax-free (or duty-free  as they are sometimes  known)  shops are a 
widespread  phenomenon  "throughout  the Community.  They are for the most part 
situated at ports and airports  or on board international  means of  transport. 
In the case of shops at ports and airports  their status is essentially  that 
of a customs/tax  warehouse.  Sales made in  these tax-free  shops are confined 

-30-
to persons  leaving the country  concerned. 
Clearly  tax-free outlets  are economically  important  as is  evidenced 
by the reliance  laid on.them  by port and airport authorities  and inter­
national  transport  companies.  Their attractiveness for  the traveller 
stems from the operation  of the  country of destination principle for  taxes 
along with  the tax-free  allowances  system.  Taxation in  the country of 
destination  ensures  that goods may be  bought by travellers  in a tax-free 
outlet and exported  free of tax whereas  the tax-free  allowances  scheme 
ensures  that these goods,  within  limits, may be  imported  tax-free into  the 
country of destination.  The goods in question  can thus enter into  home use 
in the Community  completely free  of tax. 
Community  law and  tax-free  shops 
59 · The  only legal provision  in Community  law governing  travellers' 
tax-free  allowances  in which a particular reference  to tax-free  shops is 
made ir; Article  6(2) of  Directive  69/169/EEC.  This provision obliges  the 
Member States to take the necessary  steps to permit remission  of tax for 
travellers  leaving  their territory  under certain specified conditions 
and is proceeded  by a clause drafted  as follows  "without  prejudice 
to rules relating  to sales made at  e-irport  shops under customs  and on 
board aircraft". 
This clause,  which was inserted into  the directive  when it was 
amended  for the first time, in 1972,  to introduce  on an  optional 
basis, a remission  of tax-scheme,  has been invoked 
by Member  States' authorities  as authorising  the existence  of tax-free 
shops in intra-Community  travel.  It is noteworthy  that a reservation with 
respect to tax-free  shops is not included in  the basic rule,  namely 
Article  6(l) of the  Directive, obliging  the Member  States to take appropriate 
measures  to avoid remission  of tax being granted  for deliveries  to Community 
residents  who benefit  from the common  tax-free  allowances  · 
60. The  only other provision  of the  directive  which can be  considered 
to liave a bearing on tax-free  shops or rather goods bought  therein is that 
condition  (mentioned  in paragraphs  9 and 29)requiring  goods benefiting  from the 
intra-Community  allowance  to have been acquired subject  to normal tax con­
ditions on the  domestic  market of one of the Member  States. As previously 

•31-
remarked,  this condition  does not exist in relation  to the  third country-
allowance. 
61. In  case Ho. 158/30, the  European  Court of Justice had, for the 
first time, to deal v;ith the Directive  69/I69/EEC. 
This case concerned  cruises  operating from  Germany,  mainly on the 
Baltic Sea, on  board of which were offered  for sale goods normally sub­
ject to high duties and taxes, for example,  alcoholic  drinks,  tobacco 
products,  butter,  meat, cheese.  The agricultural  goods involved  also 
benefited  from export  restitutions  under the common  agricxiltural  policy.  • 
A wholesale  trader and a  retailer  together  instituted  proceedings before 
the Hamburg  Finance Court  claiming  that the butterbuying  cruises  were in 
breach of Cummunity  law. The Finance Court  referred  the matter to the 
European  Court for  preliminary  ruling  which -was delivered  in the  latter 
Court's judgment  of 7 July  198l. The  Court's  conclusion  was that the 
practice  of allowing  these butter-ships  to continue  to operate  was illegal. 
Insofar as Directive  69/169/EEC  is concerned it  ruled as follows  : 
"In the case of travel between  non-member  countries  and the 
Community,  the exemption provided  for in  Cotmcil  Directive  No 69/169 of 
?S) Kay 1969 on the  harmonization  of provisions  laid down by  lav;, regulation 
or administrative  action  relating  to exemption from turnover  tax and  excise 
duty on imports  in international  travel may be  granted only  to travellers 
who arrive in the  customs  territory  of the  Community  from a non-member 
country and in  this case the circumstances  in which the goods have been 
acquired  are irrelevant  to the  grant of the  exemptions. 
In the case of travel  within the Community,  where the journey 
from one Member  State to another  involves  transit  through  the territory 
of a non-member  country  or begins in a part of the  territory  of the  other 
Keraber State  in which the taxes to which the directive  refers are not 
chargeable  on goods which are consumed  within  that territory,  the travelle 
must be able to establish  that the goods transported  in his luggage 
were aquired  subject  to the  general  conditions  governing  taxation  on 
the domestic  market of a Member  State and do not  qualify  for any refund 
of turnover  tax and/or excise  duty. If the  traveller  is unable to provide 
the aforementioned proof  he may  enjoy only  the more  restricted  exemption 
provided  for in the  case of travel between  non-member  countries  and the 
Community. 

-32-
In adopting  Directive  No.  69/169, and the Second and Third 
Directives  of  12 June  1972 and of  10 December  1978 respectively  which 
supplement  it, the Council intended gradually  to establish  a complete 
system of exemptions  from turnover  tax and  excise duty for  goods contained 
in travellers'  personal luggage. Consequently  in this field the 
Member States are left with only  the restricted  power given to them by 
the directives  to grant exemptions  other than those  specified  in the 
directives. " 
Commission's  attitude  to tax-free  shops 
62. The Commission  has always recognized  and continues  to recognize 
the political  sensitivity  of the tax-free  shops issue. In making its 
proposal  for gradual suppression  of tax-free sales within  the Community 
in 1972 (l) and in subsequently withdrawing  this proposal  in the  face 
of the impossibility  that Council  would agree it  was conscious  of this. 
It was equally conscious  of the  political  angle when in  1979 it took 
a decision  not to press for  the abolition  of tax-free  shops but to 
continue its  efforts to bring order  into the system. 
63. Following  the Court's judgement  in the  case described  above the 
Commission  has naturally  reconsidered  the situation  and, in February  19^2, 
came to the broad conclusion that  the Court's judgement  implied that  the 
practice of allowing  sale of goods free of customs  duties and agricultural 
levies to travellers  in intra-Community  trade was not compatible with 
Community  law. It notified  the Member  States accordingly. 
(l) OJ No C 113,  2ti.10.1972 , p.  15. 

PART  II 
SMALL  PARCELS  OF  A ITOU  COMMERCIAL  NATURE 
Background 
64» ™hc  Community  has instituted  a common  system of tax-free  allowances 
for small parcels  (called  email "consignments"  in the  directives)  of a 
non—commercial nature sent from  one Member  State to another or from a third 
country to a Member  State. The intra-Community  scheme  dates from  1974 where­
as that fcr third countries  was first adopted  in 1978. 
The primary  motivation  behind  this system of allowances  is similar 
to that behind the travellers'  allowances system  : removal of obstacles  to 
the development  of the internal  market for  the intra-Community allowance 
and adoption  of a unique Community  approach for  the third country allowance. 
The intra-Community allowance  also aims at facilitating  personal  and family 
contacts  between  private  persons  in different  Member  States.  This  facili­
tation of family contacts  is of particular  importance  in certain  cases such 
as that of migrant workers  where exchange  of parcels can be of  great personal 
and sometimes  economic Importance. 
Current  state of development 
65·. The  following  table gives details  of the cxirrent  tax-free  allowances 
applicable  to small parcels. 
These were adopted  by the Council on 17 November  198]. and apply in 
the Member  States  since 1 January 1982. 
Table; Allowances for  small parcels  of a non-commercial  
character  applied  by the Member  States 
Member State Intra--Community  allowances 
(70 Ecu) Third Country allowance 
(35 Ecu) 
Belgium BP 2900 BP 1400 
Denmark Dkr 550 Dkr 275 
Germany DM 175 DM 90 
Greece Dr 4300 Dr 2150 
Prance FF Z120 PP 210 
Ireland Irl 43 Irl 2A 
Italy Lit (33571) Lit (44286) 
Luxembourg LP 2800 LP 1400 
Netherlands IIF1 200 HFl 100 
United Kingdom U;:L 40 DKL 20 
) = unrounded  national  currency  equivalents  calculated  by the Commission 
departments owing to  the lack of officially  fixed figures. 

-34-
66, The  following  table s 
to certain  goods if  they are hows the quantitative allowances which apply 
sent in a small parcel  from a third country. 
Table -Quant itat ive allowanccs 
Good 3 Allowances 
Tobacco  products 50 cigarettes  or 
23 cigarillos  or 
10 cigars or 
50 grams of smoking  tobacco 
Alcoholic  beverages j 
1 bottle of spirits (not exceeding 
one litre) or 
2 bottles  of still wine 
Perfumes 50 grams of perfume  or 
0.25 litres of toilet water 
j 
Coffee 300 grams or j 
200 grams of coffee extracts  or essences; 
Tea 100 grams cir ' 
40 grams of tea  extracts  or essences 
67 · It is  important  to note tiiat Member  States way reduce these 
quantities  or, indeed,  altogether  exclude  the goods mentioned from  the 
benefit of the  allowance.  Denmark  excludes tobacco products,  alcoholic 
beverages  and perfumes  from the allowances.  Ireland  excludes tobacco 
products  and alcoholic  beverages  and the  United Kingdom  reduces  the 
allot ranee for spirits to 0.25 litre. 
In relation  to small parcels  from another  Member  State, it is also 
open to Member  States to restrict  the quantities  of the  goods mentioned  in 
the Table III (see page  5) for the intra-Community allowance  and 
to exclude these  goods if  they so wish. However  a provision  is included 
in the directives obliging  Member  States to apply an intra-Community  régime 
at least  as favourable  as that applied  by them to third countries.  All 
Member States,  apart from  Italy and Luxembourg,  apply differing  quantitative 

-35-
allowances  to these goods and those mentioned  above as applying special 
restrictions  or exclusions  (Denmark,  Ireland and the United  Kingdom)  also 
apply these in the intra-Community  context. 
68 . The  most important conditions attaching to the small parcels  scheme 
are : 
a) the small  consignment  must he of a  non-commercial  character, and 
h) it  must be sent  from one private  person  to another. 
69 . The  criteria  determining  non-commercial  character,  differ slightly 
in the intra-Community  scheme  and the  third countries  scheme.  Both schemes 
require that no  payment  on the part of the recipient be involved.  Both 
also reqviire  that the  goods be for personal or family use and not for 
commercial  use, the  nature  and quantity of the  goods being used as the 
yardstick.  The difference  occurs  in regard to occasionally. Parcels 
from third countries  must be of an occasional  nature  while there is no 
such requirement  in respect of  intra-Community  parcels.  However  for intra-
Community  parcels to  qualify  for the tax-free  allowance  the goods involved 
must 3lave borne normal  taxes and duties on the  domestic  market  of one of 
the Member  States. 
70 . One further provision in the  third country small parcels  directive 
stipulates  that where goods,  such as tobacco  and spirits,  which are subject 
to quantitative allowances, are contained in a parcel in quantities  excee­
ding the relevant  allowances  then no relief  at all is given for the parcel 
in question. 
71.. Community  law also provides for the suppression of  customs  clearance 
fees for  intra-Community  parcels  which qualify  for exemption  from taxes 
and duties. 
72.. Finally  there is an  annual  fixing  of the national currency equiva­
lents of the common  allowances, the  governing  provisions of  which are the 
same as those for travellers'allowances (see  paragraph  20). 
Development  of the system 
73 · In general the small parcels tax-free  allowances  system works 
smoothly  and has net  encountered  niany problems.  The allowances  have been 
recently  increased and  appear  adequate  for the  time being. However,  as in 
the case of travellers  allowances, the  Commission  is conscious of the 

-36-
-the potential for erosion  of the  real value of these allowances  and will 
propose  increases  at appropriate times.  As to the  translation  of the 
common levels into national currencies,  the problems  here are common to 
both the small parcels an v. other ta;:-free  allowances  direct  ives. Therefore 
the discussion contained,,  and the  improvements  proposed  in paragraphs  3'3 
to 46 arc also broadly applicable  here. 
74• On the  ouantitative  allowances  it is apparent  that there is  a need 
for definite cor.ar.ion  limits to "be  established,  particularly  in the  intra -
Community  conterrt.  The current situation is  effectively  completely  dis­
harmonised  and the  Commission  favours and will propose  common minimum 
limits between  'Somber  States. 
75. The  Commission  has long considered thai  an area in which the common 
allowance!?,  for small parcels could  "be developed  is that  of sales to indi­
viduals of booksi reviews  or newspapers  involving dispatch  from one Member 
State to another.  These  transactions arc  in principle subject  to general 
VAT rules  as regards  both importation  and exportation. 
Applicat5-on  of those rules to transactions  -which more often than 
not involve only small  amounts  is regarded  as "being particularly  onerous 
both by buyers in the  case of imports and sellers in the  case of exports. 
Information available  tc the  Commission  shows that firms  sometLT.es  consider 
it expedient  either not to  remit tax on  goods, thereby  exposing  the buyer 
to double  taxation,  or to  disregard orders placed -with  them, and this amounts 
to a legally  dubious  refusal  to sell. 
Some tax  relief applicable  to these transactions should  soon be 
enshrined  in Community  legislation  when the Commission's  proposal for  a 
directive  covering general  exemptions  from VAT on the  permanent  importation 
of certain  goods  (l), currently  under discussion  at Council, is  adopted. 
This proposal  will provide for,  inter alia, an exemption  for imports  of 
small consignments  of minimal  importance  'whether  or not  they be commercial. 
The provisions  are framed on the one  hand, in terms of value and,  on the 
other (for  intra-Community  traffic),  in terms of tax due.  The levels 
proposed are 10 Ecu in  value and 3  Ecu, with  an option to increase  to 
6 Ecu, in tax.  It is reckoned  that a large proportion  of imports of books 
etc. will  be able to benefit  from exemption  under those provisions. 
(Tj O.J. c 171, 11.7.80 

-37-
76. However  the Commission  feels that the situation could he further 
improved  "by introducing tax  relief  in respect of the importation of  hooks, 
reviews  or rewspa,pers  addressed  hy a taxable  person  established in a  Member 
State to an individual in  another  Member  State provided that tax has  been 
paid on the  goods in the country of  consignment  and - possibly - the value 
o'f the goods does not exceed  an amount  fixed at  such a level (higher  than 
the 10 Ecu  mentioned  above)  so as to avert any serious  risk of distortions 
of competition  arising  out of differnces in VAT rates  between  Member  States. 
This risk would seem to be small  however,  since the  goods in question are 
normally subject to a low rate of tax in  Member  States, since  postage  off­
sets the differences in tax rates and the  goods sent are not  always  avai­
lable from taxable  persons  in the country of importation. 
77· A question  which also arises in the  common  system  of allowances 
for parcels is that of  marginal  relief  for parcels  exceeding  the normal 
allowance  limits  in value  terms or in terms of the quantities of  tobacco 
products  or alcoholic drinks contained therein. As  mentioned  in para. 70, 
such parcels would not benefit  from any relief at all under current provisions. 
Undoubtedly,  it could  appear  anomalous  in the eyes of an individual 
receiving  a parcel valued at, say, 80 Ecu or containing 60 cigarettes that 
the parcel should be taxed on its  total value "whereas  a parcel of a value 
of 70 Ecu or containing only 50 cigarettes is completely free of tax. The 
argument  for maintaining  such an arrangement  is essentially administrative 
as the procedures  necessary  to exempt  the first 70 Ecu value of a parcel or 
the first 50 cigarettes  would be cumbersome  and costly. For  example,  which 
goods would be allowed in  under the 70 Ecu  limit ? In a parcel containing 
cigars and cigarettes,  which would be allowed in free of  duty ? However 
these problems  should not be over-estimated and in the context of an  acce­
lerated  clearance  procedure  (discussed  below)  could well be  overcome. 
78·. Another  possible solution to the  problem  and one  which appears  admi­
nistratively  more acceptable  would  be to give  marginal  relief  in terras of 
tax due on a given  consignment.  For example,  it may be  worth while consi­
dering a provision  which provides that, in the  case of an intra-Community 
parcel exceeding  the 70 Ecu  limit marginally but  fulfilling  all the other 
criteria  for exemption  from taxes, no tax is  payable  by the consignee  where 
the total tax due is less  than 5 Ecu and  where  it exceeds  5 Ecu the  total 
amount due is  reduced  by ;..· Ecu.  Similarly,in  the case of a parcel  con­
taining goods in excess  of the relevant quantitative Limit, it is considered 
that tax-free  admission  could be  envisaged  up tc the  common  limits  to be laid 
down (see paragraph  74). 

FART III 
CLEARANCE PROCEDURES  APPLIED  TO INDIVIDUALS 
79» The  Commission  has long been concerned  about the way in  which indi­
viduals experience  the reality  of the common market.  In this context  one 
of the most striking  experiences  (negative  or positive  as the  case may be) 
an individual  can have is the  clearance  procedure  applied  to him when  lie 
crosses an intra—Community  border or when he  goes to collect a parcel  sent 
to him from another  Community  countiy. Unfortunately all  too often the 
manifold controls  still applied  in intra-Community  traffic  of this nature 
lead to severe  frustration  of the  individual  and disillusion  him as to the 
real impact of the  Community  at his  level. 
80. For  travellers,  the controls  vary widely as between  the various 
TJember States and the  method of transport  used.  Certainly,  these controls 
orginate  from reasons  other than taxation  and as  such fall outside  the ambit 
of this report.  However,  even looking  to the  tax-related controls only, 
these represent  an area worthy of critical  analysis  which could be ripe 
for some action at the  Community  level. It should be noted that this aspect 
for clearance  procedures  has to some  extent been noted in the  travellers' 
allowances  directives  where  it is provided  that Member  States are required 
to enable  travellers  to confirm  tacitly  or by simple  oral declaration that 
they are within the  limits  and fulfil the relevant conditions.  This require­
ment was added to the  system in 1972 and  aimed at encouraging  some,  real 
simplification  of cross-border  controls for  the normal  travelling  public. 
The idea  was to  generalise  the use of the  "red/green"  or "dual-channel" 
or analogous  systems  of passenger  control  which enable the traveller  to 
choose for himself  whether  he is  within the allowance  limits and, if so, 
to iX.ss  through  the border  control subject only  to spot check as opposed 
to systematic control. 
81. However,  whether  or not the  traveller  has felt a genuine  simplifi­
cation is open to question.  In the  case of oar  travel,  considerable 
differences  still exist in the  cross-border  controls applied  between  the 
Member States. Some apply systems  where the actual controls applied  are 

minimal  tiiercas  others control rlmost  on a syctetnatic "baois with ccnscquential 
long delays  at bcraor pootc.  Ac far back as i960, the Ccmnicsion  recotoraen^ecl 
to ihs Keniber States  tiiat border  control  of normal private cars shculd  be 
oarried out only in excentional circumstances  and tc  remove the actual 
physical  barriers  at eustome  posts(i)  .Clearly  there is  a need to reviev. the 
itnpact of this recommendatien  and perhaps  incorporate  a re-iteration  of its 
öbjectives in  Community  law. 
82» Also,  hours of cpening  of crocss border  control points  can be a 
souroc of mu-' h frucirat  J"n to a travoller  requiring  npccifio  oustomp  or tax 
contrcls  e.g. in  the: caje  of pa.yraont  of ta:-: cn goods for which Lax reraißsioij 
is being claimed  in the  country cf -iaparture.  Kany cress borrler points 
oporate uhat are effeciivcly  Office  heurs v/h ick are hardly  rele-.ra.ni  to the 
nornal traveller  who may  find himsnlf crossing  the border  late at night. 
83• Some  Member  Statos Tor which oar traffic is essentially  maritime 
(i. c. arriving  by ferry) apply  a red/green  system of control  to this 
traffic which appear?  to -.vcrl: satisfactorily.  Of course the numbers  of 
cars involved  are considerably smaller  than in the  case of normal  traffic 
crossing  a land border. Consequentially generalization  of the  system to 
such trafficvrould  need careful  examination  as to  practicability  on the 
ground. However,  the Commission  is of the  opinion that  it is  necessary 
to ease cross border  controls applied  to car  traffic in the  direction  indi­
cated by the  directive  viz. tacit declaration  by the  travellers  and occa­
sional checks  only. 
84* As to air  passengers,  the controls applied  are usually  more formalin 
and generally  are modelled  on the  tacit declaration idea  in the  directive 
It may ho  that further relaxation  of the  general tax-related controls  is 
merited and this requires further study  on practical  level. It is considered 
that the general comment on  particular  administrative  facilities  for 
travellers  also applies  here albeit to a lesser extent. 
8> In the  eaae of srnall parcels,  sometimes  the clearance  procedures 
involved  can be  particularly  burdensorne  and time consuming  for the indiVi­
rtual involved.  Obviously  this coinment  applies  wherc the allowance 
is exceeded  or the  conditions  not fulfilled.  In some Member  States it  is 
Oonuaiscion  Reccnncndation  Ho. 60/289/1^0  of 21 June 1968, OJ Ho L  lo7, 
17.7«68, p. 16. 

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necessary  to go to a clearance  depot  to obtain the parcel,  comply with 
various administrative  procedures  and pay, in addition to the relevant  taxes 
and duties  chargeable,  a customs  clearance fee. In others, a  more simpli­
fied system  applies  whereby  the postman  brings the parcel to the  consignee's 
home and collects  the relevant  charges,  which have already  been assessed. 
86 . In general, the  Commission  considers that the clearance  procedures 
applied in  intra-Community  trade to  goods belonging to or  sent to indivi­
duals where taxes or duties are  payable  could be  simplified  and streamlined. 
It envisages  a clearance  procedure  which would enable  the person  involved 
to make his declaration and pay the  necessary  duty and/or  tax with the 
minimum  fuss. The authorities'  requirements  and the  persons' s obligations 
would be laid dovm in Community  legislation  which would incorporate,  inter 
alia, guidelines on the  procedures  to be uses', the calculation of  taxes due 
and the method  of payment,  the general aim being to  facilitate  the indivi­
dual involved. 

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PAST IV 
SUMMARY  OF MUT CONCLUSIONS 
87 • This part of the report outlines the  main conclusions  which the 
Commission  has dream from its examination of the  Community's  system  of 
tax-free  allowances benefiting  individuals.  Following publication of the 
report and. in the  light of the ensuing discussions  among the various 
interested  parties,the  Commission  intends to present to Council a 
proposal for a  directive  on tax-free allowances  which  will incorporate 
provisions  based on this report. 
88. The  Report's  main conclusions are as fellows : 
a) "the current  intra-Community  travellers'  allowance is not  adequate  and 
increases in  real value must be made ; 
t>) the Council should  approve  a pluriannual  programme  for development 
of the system  ; 
c) discussions  on third country/  travellers  allowances  should be  opened 
v/ith neighbouring  countries ; 
d) allowances should not be  reduced  in national currency  terms and a 
semi-automatic  increase  procedure  should be established to prevent ^ny 
happening  .; 
e) realignment of national currency  parities  should be  reflected  in the 
allowances on the basis of d.)  above ; 
f) across  the board increases  in quantitative  allowances  for tobacco  and 
alcoholic  drinks  are a long term objective  dependent  on convergence  in 
excise rates being achieved; 
g) the wine allowance  should be increased and the  allowances  for tea and 
coffee abolished  independently  of harmonization  of excise  rates; 
h) the granting of a higher  tobacco  allowance to  non-Community  residents 
than to Com unity residents is  inconsistent  with the concept  of Community 
preference  and should  be discontinued; 
i) common  procedural  methods  for the tax-remission  scheme  should be estab' 
lish.ed in order to  simplify  its operation ; 

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j) the small  parcels  allowance  scheme "broadly operates  satisfactorily 
"but could "be developed : 
- to facilitate traffic  in "books etc. and 
- to provide  some marginal  relief for parcels  almost within the 
normal allowances ; 
the clearance procedures  applied  to individuals  should be  simplified.