Travel Reference
In-Depth Information
in national regulations of the EU-candidate
countries (such as sale taxes adjustments),
rather than via applications of the EU regula-
tions. The situation, however, has been differ-
ent with Ukraine, where the range of goods has
remained important, as expansion of inter-
national retail chains has been slow. Ukrainians,
of course, can enjoy a better range of goods in
Slovak, Czech and Polish hypermarkets, and
purchase these goods for their own use or for
resale. A major part of the cross-border shopping
between Slovakia and Ukraine, however, has
beenrelatedtotradingandsmugglingalcohol
and tobacco products. After its accession to the
EU, Slovakia had to increase sales taxes on
these products, making trade in them even
more lucrative. Slovak police, for example, have
estimated that one-third of all cigarettes sold in
eastern Slovakia are smuggled from Ukraine.
What were the economic implications of
trans-border shopping? The mayors considered
that the average Slovakian expenditure abroad
exceeded that of foreign nationals in Slovakia.
Most estimated that Slovak daily per capita
expenditure was some Sk1000-5000 (US$25-
125). If this is accurate, then given some 30m
border crossings by Slovaks annually, total
expenditure could be between $700m and
$3500m (with the lower end of the range being
more realistic). This has to be set against total
Slovak imports in 1999 of approximately
$10bn. Therefore, while not negligible, informal
trans-border shopping of $0.7bn was of no
more than moderate significance compared to
formal trade.
Most shopping, however, was by local peo-
ple living in the border regions, so the regional
impacts of arbitrage may be more substantial.
The situation varies according to the border
under consideration and the time period. In the
late 1990s, receipts from petrol sales to foreign-
ers provided limited benefits for Slovakia's
Hungarian border regions because the sales
taxes were centrally accrued. The same applied
to alcohol and cigarette sales to Polish tourists in
northern Slovakia. After the introduction of a
flat tax of 19% and substantial increases in sales
taxes in Slovakia in 2004, the cross-border
shopping flows changed. Slovak petrol became
one of the most expensive in Europe and many
Slovaks tried to buy it in the Czech Republic
and Hungary. Many Slovaks living near the
Slovak-Polish border renewed their interest in
shopping in Poland. Prices of selected food
items (e.g. sugar, milk, poultry) in Poland were
only 50% of those in Slovakia and became a
major travel motive for hundreds of thousands
of Slovaks travelling to Poland (Bana
E
nský,
2004). These changes in cross-border flows
illustrate how sensitive shopping tourism was to
modifications in tax rates.
The foreign shopping expenditures by
Slovaks resulted in income losses for border
region businesses and in terms of direct and
indirect taxes for the state. Customs barriers
sought to protect the domestic food, textile and
clothing industries, but high VAT rates in
Slovakia and low production and circulation
costs in the Polish and Hungarian shadow
economies resulted in price differentials which
could be as high as 30-50%. These were likely
to have an important negative effect on local
retailers in these sections, whilst benefiting indi-
vidual consumers in the border regions.
The evidence from the survey suggested
there was only limited cross-border labour
migration, reflecting the reality of economic
conditions in the Slovak-Hungarian, Slovak-
Polish and Slovak-Ukrainian border regions.
Instead, long-distance migration to Prague,
Germany, and North America was of greater
importance. The only exception was daily and
weekly commuting (both of unskilled and pro-
fessional workers) from Bratislava to Vienna,
reinforcing the economic dynamism of what
already constituted core economies. However,
even this has to be kept in perspective for only a
small proportion of the total Slovak labour force
worked abroad (compared to say the Southern
European countries in the 1960s). Most foreign
workers in Slovakia also tended to gravitate
to the more dynamic Bratislava, Central and
Western regions, bypassing the Hungarian,
Polish and Ukrainian border regions.
Role of the EU in Fostering
Cross-border Cooperation and
Travel Infrastructure
The isolation of border areas has been twofold.
First, the presence of borders cuts off communi-
ties from each other economically, socially and
