Planet calls for UK shopping tax refund reform; Asia Pacific spending with European retailers rises

INTERNATIONAL. The UK government needs to upgrade its VAT refund system to capitalise on the growing purchasing power of shoppers from the Asia Pacific (APAC) region. The call for modernisation comes from international tax free shopping refund specialist Planet, on the back of research arising from its latest Planet Shopper Index.

The report shows that the strengthening of currency across the APAC region has coincided with increased travel and international spending with European retailers in Q4 2018.

However, Planet claims the current paper-based VAT refund system is dated and is causing the UK to fall behind international competitors who offer digital tax free shopping services.

Planet said that the UK needs a new “100% digital system that is efficient, economical and user-friendly”. It also raised fears that the UK risks a further loss of international competitiveness if it exits the customs union post-Brexit.

Findings from the Planet Shopper Index show that Hong Kong residents are the highest international spenders per transaction with European retailers, followed by shoppers from Vietnam. The latter, like China, has a huge emerging middle class population.

Planet estimates that the worldwide tax free shopping market is now worth about US$60 billion a year.

The index combines Planet’s data on tax free purchases across Europe for each source market with key economic measures including inflation, GDP growth, and currency movement.

It highlights a correlation between income growth and international travel, evident in the performance of Vietnam. Travellers from the country emerged as having the second-highest average spend per transaction (ATV) with European retailers in Q4 2018. Vietnamese shoppers were one of the biggest climbers in the last quarter, with an average of €902 per purchase.

Meanwhile, China (average €801 per purchase), retained its position at the top of the table for overall index score, which includes tax free sales, ATV, inflation, currency, and economic growth.

Planet also noted that the power of currency stability extends beyond the APAC region, with Morocco climbing six places on its league table. It said this was as a result of the strengthening dirham and increased ATV among its international shoppers. The dirham has experienced a Q4 currency growth against the euro and pound, of 5% and 5.7% respectively, which coincided with a 25% increase in ATV, to €475.

Planet UK Country Manager David Perrotta said: “International shoppers are increasingly becoming a key source of value to the volatile European retail market, with these consumers spending an average of 3.7 times that of domestic shoppers.

“Retailers should consciously think about the cultural nuances of their international shoppers, develop new and innovative ways to attract shoppers into physical stores and put experiential marketing at the heart of their customer offer.

“To bolster and future-proof the retail market, more needs to be done by retailers to capitalise on the growing purchasing power of international shoppers and the government must digitalise the tax free refund system in order to encourage this lucrative customer base to choose the UK over other destinations.”

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