DUTY-FREE LIMIT CHANGE BEST LEFT ON SHELF

For several years, the Treasury has been telling the Government there would
be rich pickings if New Zealand's duty-free liquor allowance were tightened.

Bring the present generous policy more into line with world norms and as
much as $7 million would be reaped in revenue.

The advice is obviously tempting to any government wishing to add to its
coffers.

Yet, as well as taking New Zealanders back to the bad old days of strictly
rationing their duty-free buying, such a policy would likely be self-defeating.

The bone of contention for those who want a harsher regime is the inclusion
of liquor in the de minimis rule on imported items.

This means that if the duty payable on goods (excluding tobacco) is less
than $50, it is not collected. Removing liquor from the de minimis rule
would effectively reduce the maximum amount a traveller could bring into
New Zealand duty-free from three 1125ml bottles of spirits to just one. The
extra revenue envisaged by a joint report by Treasury and the Customs
Service would hinge on people paying duty rather than abandoning their
purchases at the Customs counter, and, most importantly, the extent to
which they kept buying liquor at the duty-included price.

Therein lies the flaw in what would amount to a naked revenue grab.
Experience with liquor, and with cigarettes, suggests that price increases
are just about the most potent of purchasing deterrents. Indeed, the
managing of consumption in that manner was the basis for last month's
increased tax on light spirits, a measure designed to cut teenage
binge-drinking but which hit sherry drinkers hardest. Thus, it can readily
be assumed that a tightening of the duty-free allowance would persuade many
travellers to stop buying liquor that way. If this led to more purchases at
domestic outlets, it would be cold comfort for duty-free shops, which would
experience lower sales, and airport companies, which would enjoy lower
revenues.

Normal purchasing traits also suggest that the revenue accumulated by the
Government would be far less than has been surmised.

In effect, the possibility of a higher take would be largely offset by
reduced buying.

At the moment, the status quo will remain - but not because of that
probable outcome.

The Treasury-Customs Service report, obtained by the Herald under the
Official Information Act, puts forward the view that many travellers would,
in fact, elect to pay duty rather than surrender excess bottles of liquor.
This, the report says, would put added pressure on customs officers at a
time when they should be focused on border security.

In the post-September 11 environment, there can be no argument with that,
even if the likelihood of sharply reduced buying suggests the degree of
disruption would be less than contemplated. Quite simply, there can be no
distractions that lead to a slackening of vigilance at our borders.

However, given the report's rationale for retaining the status quo, it
seems reasonable to expect that, once the security situation has
stabilised, there will be a renewed push for a reduced duty-free liquor
allowance.

If so, bureaucratic mean-spiritedness can be the only motive. New
Zealanders are hit heavily when they buy spirits at their local
bottle-store. Typically, a variety of duties, taxes and levies accounts for
three-quarters of the purchase price.

If sidestepping the de minimis rule is not the norm internationally,
neither is that. It is no wonder that travellers take full advantage of
duty-free buying - and, indeed, that domestic sellers are hugely envious of
the advantages enjoyed by their duty-free counterparts. Taking away this
small perk could be the work only of those of the most curmudgeonly
disposition. Worse still, it is highly unlikely to make a worthwhile
contribution to the Government's revenue haul. It is an idea whose time
should never come.