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UK makes controversial decision to cancel duty-free purchases – WWD



LONDONR – From a shot in the arm – to a shot in the leg.

British retailers reacted with shock and outrage this week to a decision by the UK Treasury to abolish the long duty-free shopping scheme for foreign tourists, a move that will hurt sales across fashion, beauty and accessories and will influence top tier retailers including Harrods, Selfridges, Harvey Nichols and Liberty.

From 1 January 2021, international buyers will be able to purchase duty-free goods in the UK if they agree to mail them to their countries of origin.

The New West End company, which represents the retail and hospitality businesses around Oxford, Regent and Bond Streets, called the decision a “hammer blow” to British retailers who are already battling the three-headed COVID-19 monster. , Brexit-related trade uncertainty and heavy U.S. duties on some luxury goods made here.

“British businesses are shocked by the Treasury’s sudden decision to end the tax-free shopping scheme. This is a massive blow to the UK economy, with the government effectively telling international tourists, especially those from the Middle East and the Far East, for whom shopping is a big attraction, to go anywhere but UK to spend their money, “the lobby group said.

“The treasury will not only save nothing, but the inevitable decline in the number of international tourists and spending in the UK will reduce all other VAT revenues,” the organization argued, adding that total annual spending by visitors international are more than mil 22 billion, of which 10 per cent is duty-free shopping.

“This will cost the UK billions in lost tourism as we become the only country in Europe that does not offer duty-free shopping for international visitors,” the lobby added.

Tax-free shopping is a UK institution, with such as Selfridges – which has stores nationwide – and Bicester Village in Oxfordshire setting up special roundtables to process tax-free documents as a service to shoppers. Currently, non-EU visitors can make purchases in the UK and reclaim the value-added local tax cost for their purchases.

Two years ago, Global Blue, which specializes in handling tax-free payments, opened its own concierge service on Albemarle Street, offering coffee and champagne to customers as they wait for their tax-free documents to be finalized.

Retailers have been waiting for the Treasury to maintain the tax-free scheme and extend it to EU countries from next year, after Britain finally leaves the EU.

The New West End company argued that the Treasury decision would transform a potential 2. 2.1 billion, tax-free bonus from the UK’s exit from the EU into a 3.5 3.5 billion loss in tax-free sales.

“This is a 5. 5.6 billion blow to the UK economy even before counting the negative impact of the shock on wider international tourism spending, at a time when retail and tourism across the UK are already tremble from the impact of COVID-19, ”the organization said.

The lobby group stressed that high-spending tourists would now choose to go to Paris, Rome “or indeed any European country other than the UK to spend their money. The decision will clearly undermine the government’s ambitions for a” Global Britain. “Far from securing an extra 500 500 million in taxes from the 3.5 3.5 billion spent annually by international visitors, the move risks those sales moving overseas to Paris and other destinations.”

In a decision published online, the Treasury simply argued that the current tax-free system was too tedious and expensive. Treasury said it made its decision based on interviews with stakeholders during a review conducted earlier this year, during the blockade.

“Many stakeholders have told us about the operational challenges of the current system and that they do not want to see an extension of the EU scheme in its current paper-based form. “On the contrary, other stakeholders have explained the benefits they see and that they would like the scheme to be extended to the EU in digital form, which the government continued to explore in parallel with the consultation,” the government newspaper said.

“However, the VAT Retail Export Scheme is a costly relief, which does not benefit equally for all GB, with the current use of the mainly London-based scheme. Retailers will instead continue to be able to offer VAT-free purchases, in line with international taxation principles, for non-EU visitors who buy items in the store and send them directly to their overseas addresses. After the end of the transition period, this will also be available to EU visitors. “

British buyers traveling to the European Union will still be able to shop duty-free in any country from 1 January 2021.

Jace Tyrrell, chief executive of the New West End Company and chairman of the International Sales Association, called the decision “a disaster for the UK, not just the West End. Retail and tourism across the UK are already being felt from the impact of COVID-19 and need an increase – not self-inflicted wounds.

“We are surprised that this decision seems to have gone from note to note in a wider consultation on expanding tax-free shopping. In an effort to secure millions of tax revenues, the UK is throwing billions into spending. foreign at a time when we need to welcome the world – and its wallets – to our cities across the UK “.

Tyrrell said the annual cost to international visitors to the UK is more than 22 22 billion, so any reduction in attraction for holidaymakers and visitors “will have significant financial consequences”.

He added that the New West End Company, along with industry colleagues, are reviewing legal advice on how best to proceed with the government decision.

Joss Croft, CEO of UKinbound, the trade association representing inbound tourism, said the Treasury decision was “another nail in the coffin of Global Britain, a short-sighted move that will negatively impact the UK economy and reduce our competitiveness.” “Instead of imposing barriers to trade, the government should urgently consult with businesses in order to fully understand the consequences of this policy and adapt it before the irreparable damage is done.”

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