UK. Travel, tourism and retail business leaders have issued an open letter to the UK Chancellor calling for a reversal of the government’s decision to end tax free sales for visitors to the UK from 1 January. They said the move could result in 70,000 job losses and £5.6 billion in lost revenue for the UK.
Among the signatories were leaders of Heathrow, Gatwick and Birmingham airports, retailers such as Selfridges and Marks & Spencer and brands including Mulberry.
As reported (and as expected), travellers departing the UK for EU countries will be able to purchase duty free goods from 1 January 2021. But in a bombshell addition to the legislation, tax free sales will be withdrawn for all outbound passengers on a range of categories, expected to include beauty, fashion and electronics.
The government claimed that this “follows concerns that the tax concession is not always passed on to consumers in the airport. In some instances these tax free goods are brought back into the country by UK residents, putting high street retailers at a disadvantage,” it said.
VAT refunds for overseas visitors in UK shops will also be removed under the plan. Overseas visitors will still be able to buy items VAT-free in store and have them sent direct to their overseas addresses, but what the Treasury termed “the costly system of claiming VAT refunds on items they take home in their luggage” will be ended.
Association of International Retail (AIR) Chief Executive Paul Barnes, who co-wrote the letter, called on the UK government to reverse the “short signed” and “devastating” decision.
He said: “Madrid, Milan and Paris are rubbing their hands with glee at this self-inflicted wound.
“If we charge a fifth more for the same goods, international visitors will not hesitate to switch their city breaks to other countries and the stores and jobs will follow within months.”
Mulberry CEO Thierry Andretta said: “It will destroy the UK’s ability to remain competitive with Continental Europe,” adding that it would also have “a material effect on jobs and manufacturing in the sector”.
AIR noted in a briefing document that:
• In 2018, international tourists spent £22 billion in the UK
• £6 billion was spent on shopping. £3.5 billion was registered as tax free sales although only VAT was only reclaimed on £2.5 billion
• While international tourists reclaim VAT on £2.5 billion of purchases, they pay VAT on the rest of the £20 billion they spend, earning the Treasury around £4 billion annually.
It said that other impacts would include:
• Fewer international visits
• Lower spending on retail and other goods and services
• Tax free spending moved to other EU countries; Paris likely to be the big winner
• Loss of existing £3.5 billion and expected £2.1 billion from EU visitors
• Additional unemployment costs; £3.5 billion supports 70,000 retail jobs.
• International visitors are 25% of West End visitors but 50% of spending
• West End spending already down 80% due to COVID-19 (to a forecast £2 billion in 2020)
• Furlough and business rate holiday ending will add to costs
• Businesses closing and investment moving out of UK; UK losing its soft power global asset.
AIR concluded: “We believe that the decision to make the UK the only country in Europe not to offer tax free shopping will damage the economy and Britain’s reputation and appeal as a destination for international visitors. We do not support the justifications put forward by the Treasury about costs or regional impact.”
