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Czech Republic: Goodbye To Duty-Free Shopping

By Kate Connolly

Prague, 23 January 1997 (RFE/RL) -- Starting this summer, the phenomenally-popular duty-free shopping zone running along the Czech Republic's border with Austria is to lose its special status.

Customs officials from both countries have agreed to bring cross-border duty-free shopping to an end after several years of discussion.

Tens of thousands of Austrians have regularly flocked across the frontier to take advantage of the cheaper prices on the other side.

In doing so, they have ignored Austrian government posters imploring citizens to keep their schillings in Austria for the good of local companies, and they have seriously alarmed the Austrian tax authorities, who have watched potential revenues disappearing.

The tax "no-man's land" was created after the fall of communism in 1989, when the Czech foreign ministry sold licenses enabling vendors to set up tax-free shops along the border. The object was to specifically to draw western consumers to the republic's cash-strapped economy, and in that the zone succeeded beyond expecations.

An RFE/RL correspondent reports that the ending of tax-free trading on the Czech-Austrian divide meets certain recommendations laid out by European Union customs officials.

Although the EU guidelines are not mandatory, Prague evidently believes the move will put the Czech Republic in the "good books" of Brussels as it pushes for entry into the European Union.

An official from the Austrian Chamber of Commerce, Harold Ertl, said the duty-free shops after the closure of the zone will come under the control of Czech customs officials and should be regulated according to normal Czech customs and tax laws.

Exkalibur, the shopping complex that makes up the main duty free area sandwiched between the Czech town of Hate and Austria's Kleinhaugsdorf, is joint-owned by Czech multi-millionaire Jaroslav Vlasak and the Austrian Ronald Seunig. It has 200,000 customers a month.

Exkalibur is taking a confident stand on the change. Albert Plank, a spokesman for Ronja SRO, the firm controlling Exkalibur, is convinced the new laws will not affect business. He says that in fact, plans are in hand to expand the complex before the end of the year, adding a hotel and casino.

"Even when our goods aren't tax free, they will still be considerably cheaper than goods in Austria," he said.

The Austrian Chamber of Commerce's Ertl agrees with that assessment. He says Czech excise duty, at between 20 and 30 percent, sharply undercuts Austrian levels of 65 to 70 percent. The average excise duty in EU member states is around 50 percent, so it's still expected that Austrians will arrive in busloads.

Andreas Segur of the Austrian Embassy in Prague notes that the Czech authorities will also benefit by ending the tax free area.

"I think they realise they've been losing out (on revenue) for a long time", he says.

Attesting to the popularity of the zone, Segur describes the overcrowding at Exkalibur as "murder," with people queueing "in the middle of the night" to take advantage of the cheap prices.