The road to the Single European Market as seen through the Danish retail trade: Cross-border shopping between Denmark and Germany

Abstract

Traditionally, Denmark has a tax structure in which VAT and excise duties played a significant role. This has caused large price differences between goods in shops in Denmark and the same goods in shops in the neighbouring country of Germany. At one time the system of duty-free allowances prevented Danes from buying many times in quantity in Germany. But since 1973, when Denmark became a member of the EEC, a large number of Danes have gone cross-border shopping in Germany. The purpose of this paper is to show how Danish-German cross-border shopping has reacted to changing conditions during the first decades of the Danish membership of the EEC up to the establishment of the Single European Market in 1993 and during the years immediately following. In the paper findings are presented from a number of surveys made on this topic between 1977 and 1996. It is shown that, even with a large difference in VAT rates, the cross-border shopping done by Danes involves hardly anything but items subject to excise duty. Even since the inception of the Single European Market, the border has continued to form a barrier with respect to other purchases. The cross-border shopping done by Germans is not caused by price differences to the same extent, but is mainly the result of difference in the range of products available on the other side of the border. Moreover, the surveys have shown that the volume of cross-border shopping done by Danes is significantly larger that that done by Germans.