Oct 19, 2020
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More brands say tourist shoppers will desert UK as tax-free shopping ends

Oct 19, 2020

A group of big names in premium and luxury retail have joined the chorus of British businesses pleading with the government to reverse its decision to axe tax-free shopping for tourists in its current form at the end of the year.

Will tourist shoppers desert London in favour of Paris or Milan next year?

Paul Smith, The White Company, Ted Baker, Hackett, Annoushka Ducas, Charles Tyrwhitt’s founder and the CEOs of Smythson, Fortnum & Mason and Johnstons of Elgin are among those who’ve signed an open letter to Chancellor Rishi Sunak. They said the new rules would be a “hammer blow” for retail.

They said that the plan will drive international shoppers to other European destinations.

“We urge the chancellor to reverse his decision, which is bad for business and bad for the Treasury’s own coffers,” they said.

Tourists from non-EU countries spent close to £30 billion in the UK last year and reclaimed £2.5 billion in VAT at the airport on their homeward journey. There had been hopes among retailers that EU tourists would be able to join in post-Brexit.

But the Treasury is changing the rules so that the VAT can only be reclaimed if the tourists ship their purchases home. Retailers said tourists have no interest in doing this and that instead of the extra VAT receipts the Treasury expects, receipts will actually go down as fewer tourists will make shopping trips to the UK.

“Removing an incentive for international shoppers to come here will affect jobs and livelihoods throughout the UK at a time when we are already facing severe pressures brought on by the Covid-19 health crisis,” the letter said.

It added that “international shoppers are extremely price-sensitive” and effectively introducing a 20% tax “will encourage them to spend their money in Paris, Milan or Madrid rather than in Britain. The UK will now become the least attractive market in Europe at the very time we were told Brexit would give British businesses a competitive advantage.”

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