Norway to halve tax-free tobacco allowance for residents

Dec.06.2022
Norway to halve tax-free tobacco allowance for residents
Norway's government plans to halve tax-free tobacco allowances for residents returning to the country from abroad, starting in 2023.

The Norwegian government is planning to halve the tax-free tobacco allowance for residents returning to the country.


The proposed measures apply to travelers who purchase duty-free tobacco products upon arrival in Norway, as well as items purchased abroad and transported into the country.


The proposed changes will take effect on January 1, 2023, reducing the tax-free allowance for tobacco products to 100 cigarettes or 125 grams of other tobacco products and 100 rolling papers per resident. The photo shows the tobacco area for arrivals at Oslo Gardermoen Airport.


The tax-free quota will be reduced to 100 cigarettes or 125 grams of other tobacco products, such as snuff, cigars, and mini cigars, as well as 100 rolling papers, including nicotine-containing e-liquid for electronic cigarettes and other nicotine products.


The state budget submitted to the Norwegian parliament on October 6th revealed this change, outlining the economic policy direction for the state in 2023.


Last week on November 29th, a coalition of minority parties (the Labor and Central parties) reached an agreement with their partner party (the Social Left Party) to ensure that their budget proposal would hold a majority in parliament.


Due to the projected budget, which is expected to be voted on in mid-December, any rule changes will take effect from January 1, 2023, unless any last-minute alterations are made. This decision could have a significant impact on the country's tourism, retail, and duty-free industries, including channels such as airports, ports, and ferries.


Avino launched an attack.


Although the proposal gathered by TRBusiness will not affect the existing duty-free tobacco allowance for international tourists (non-residents) entering the country - applicable to items purchased in another country or through duty-free purchases - tourists and residents alike are only allowed to purchase 100 cigarettes or 125 grams of other taxable tobacco products upon arrival in Norway at the airport.


According to the website of Norway's Customs, tourists over 18 years old visiting Norway are eligible for a tax-free personal allowance of 200 cigarettes, 250 grams of other types of tobacco, and 200 rolling papers.


Travelers who stay less than 24 hours abroad can enjoy a tobacco allowance as long as they can prove that they have paid local taxes in a European Economic Area country/region.


State-owned airport operator Avinor has stated that this move will result in an estimated loss of approximately 270 million Norwegian kroner or 27.7 million US dollars in annual revenue.


In a report released last Monday (November 28th) detailing its nine-month performance, Avinor stated, "The proposal in the 2023 national budget to reduce tobacco duty-free prices has put further pressure on the group's equity status and self-funding capabilities. The impact of the proposed changes in duty-free prices for tobacco products has been factored into future cash flows.


Confusing for travelers.


Industry lobbyists believe that this change will have a negative impact on the revenue and operations of Norway's duty-free sector. In addition to harming investment, employment, and connectivity, it will also cause unexpected negative consequences.


Julie Lassaigne, Secretary General of the European Travel Retail Confederation (ETRC), said to this publication: "Unlike the internationally recognized practice of allowing duty-free exemption for 200 cigarettes or 250 grams of other tobacco products, the recent budget proposal to reduce duty-free entry limits starting on January 1, 2023, will undoubtedly harm the ability of duty-free operators to provide services to Norwegian airports, ports, and ferry routes, and will leave travelers to Norway feeling dissatisfied and confused.


Haakon Dagestad, chairman of the Nordic Travel Retail Group (NTRG), which represents stakeholders involved in tax-free benefits in Nordic and Baltic countries, has expressed concern about proposed changes.


Some are concerned that this could affect duty-free sales and shift more trade from duty-free to cross-border shopping. There are spill-over effects. One agreement suggests that if quotas are very similar, the existing quotas will make it easier for customs officials in all countries, so you don't need special rules.


I can be a Norwegian living in Sweden and have a quota of 200 cigarettes, but if I am a Swede living in Norway, I only have 100 cigarettes. This creates a significant issue in terms of documentation and the outcome may not be as expected.


Apart from the suggestion that this move may contravene the government's aim to reduce cross-border shopping, there are also other challenges in terms of manufacture and supply.


The product made up of five tobacco packages is brand new, and they hope to produce it within a few weeks," commented Dagestad.


Industry Participation


TRBusiness has learned that NTRG, ETRC, and Travel Retail Norway (a joint venture between Gebr. Heinemann and Norse-Trade AS) are in talks with customs and government officials to draw attention to the potential impact of this proposal on the industry.


As previously mentioned, both associations have criticized the short implementation timeframe of January 1, 2023, arguing that it is neither practical nor realistic. This comes as the proposed new quotas included in the national budget are expected to be approved by the Norwegian parliament.


Dagestad urged that they should not reduce the quota and if they do, they should give us time to adapt.


According to reports, York Aviation recently conducted a study commissioned by ETRC which revealed that the arrival duty-free shops in Norway and other countries/regions contribute to the economic and financial health.


Avinor has stated that a proposal to cut Norwegian residents' duty-free tobacco allowance by 50% would lead to an estimated loss of approximately NOK 270 million in revenue annually. The information was sourced from Øystein Løwer/Avinor.


Norway's model has long been lauded as an example of how the tax-free and duty-free industries can contribute to the long-term survival of the aviation industry. For state-owned Avinor, the study emphasized the importance of airport commercial revenues to the entity's profitability and growth. At Norway's largest and most profitable airport, Oslo Airport, arrival taxes and duty-free sales account for 50% of all duty-free revenue. Lassaigne warns, "If Norway's limits are reduced, the average traveler will be less inclined to purchase, and the impact will also affect all other product categories." "The ETRC urges the Norwegian government to urgently reconsider the proposed policy changes' impacts and formally consult a wider industry before moving ahead with these changes.


A spokesperson from the Norwegian Ministry of Finance told TRBusiness during a consultation that the government has proposed to halve the duty-free allowance for privately imported tobacco products arriving in Norway.


The proposed changes are aimed at creating a more consistent tobacco policy, promoting environmental and climate benefits, and generating significant revenue for the government. Additionally, the changes could reduce cross-border shopping in line with the government's political agenda, the "Hurdalspattformen".


Just like previous changes to the tax-free allowance, Norway Customs will inform travelers of the new allowance on toll.no and the official Norway Customs social media platforms (Facebook, Snapchat, Instagram, and LinkedIn).


The spokesperson added that there is currently no plan to formally consult the tax-free sector about this change.


They added that "such changes typically do not involve public consultation and are part of the national budget.


2FIRSTS will continue to track and report on this topic, with updates available on the "2FIRSTSAPP". Scan the QR code below to download the app.



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