The government's plan to end VAT-free shopping for international visitors by the end of the year has cost the UK billions of pounds in revenue, travel, and retail owners have warned.
In a letter to the chancellor, the heads
of firms such as Marks & Spencer, Heathrow and Selfridge said the move also
threatened 70,000 jobs.
About 3.5 3.5 billion in tax-free sales
are made each year for non-EU tourists.
The Treasury says tax breaks are expensive
and there is a risk of fraud.
Under the VAT Retail Export Scheme (VAT
RES), international visitors to the UK can reclaim the VAT they pay on goods
purchased but not used in the UK.
In addition to tourist hotspots such as
London and Edinburgh, it also benefits the popular Bicester shopping village in
Oxfordshire, which attracts bargain-seeking visitors.
But earlier this month the government said
it would abolish the VAT RES on December 31, when the Brexit transition period
ends, arguing that it did little good for many parts of the UK. And it is
against international norms.
Critics say the Treasury fears that under
World Trade Organization rules, the UK would also have to extend the scheme to
EU visitors after the transition period, putting a heavy administrative burden
on tax authorities.
The Association of International Retail
(AIR), which co-wrote the letter, urged the Chancellor to "reconsider this
disastrous decision."
He warned that the UK would become the
only European country not to offer VAT-free shopping to international visitors.
This will hurt tourism, retail and
entertainment industries at a time when they are "already under the
influence of Covide-19".
"Madrid, Milan and Paris are happily
shaking hands on this self-inflicted wound," said ERK boss Paul Barnes.
"If we charge a fifth higher tariff
for the same goods, international visitors will not hesitate to change their a city break to other countries and stores and jobs will be found in
months."
According to the UK tour, international
tourists spent $ 6 billion on shopping in the UK in 2018. Of those deals, b 3.5
billion were registered’ as tax-free sales, though only AT 2.5bn was subject to
VAT.
'Severe damage'
Thierry Andretta, the owner of Mulberry's
handbag maker, who also signed the letter, accused the government of being
"short-sighted".
"It will destroy the UK's ability to
compete with Continental Europe and ... it will do us a great disservice, not
to mention the material impact on jobs and readiness in this sector."
A Treasury spokesman said: "We are
using the end of the transition period to bring our personal duties and tax
system into line with international norms.
"It was subject to a full
consultation and VAT-free shopping is still available because retailers can
offer it to overseas visitors who buy items in the store and send them directly
to their home address.”
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