Think again if you are an international traveler expecting to receive a sales tax rebate on your purchases the next time you are in the UK. Tough new rules from the UK treasury mean that from next year you will not be able to get a VAT refund while leaving the country without what you buy being sent directly to your home address.
Go to luxury stores like Harrods and Selfridges that, before Covid-19, were frequented by international tourists, especially Chinese, Middle Eastern and Russian shoppers, can never recoup these high-cost travelers without the existing Scheme of Retail Export of VAT.
As part of treasury plans to restore tax-free shopping from January 2021 for British passengers traveling to the European Union after the transition, the government has also decided to end VAT refunds for overseas visitors to British stores. It is also ending airport duty-free sales of goods such as electronics and clothing for passengers traveling to non-EU countries.
The dual retail man has been heavily attacked by retail associations. The New West End company, which represents 600 businesses across the UK’s most prestigious shopping areas on UKOxford Street, Bond Street, Regent Street and Mayfaird, described the move as a massive blow to the UK economy.
Answering questions from Forbes.com, the group, said: We can not sufficiently express the devastating impact this decision will have in Britain on the international tourism and retail industry.
The UK will now be the only country in Europe that does not offer duty-free shopping for international visitors. The government effectively tells international tourists, especially those from the Middle East and the Far East, for whom shopping is a big attraction, to go anywhere other than the UK to spend their money.
A complete lack of awareness
UKTRF, which represents British travel retailers, said jobs and livelihoods would almost certainly be put at risk. Mayor Franois Bourienne added: This announcement gives a hammer blow to an industry already struggling with the devastating impact of the Covid-19 explosion. Revenue from retailers and airports will suffer.
On the aviation side, Karen Dee, CEO of the UK group of airports, AOA said: The government has once again shown a complete lack of awareness for jobs and businesses in the aviation sector. It is unnecessarily damaging vendors and airports. Many foreign visitors will go elsewhere.
New West End Company research shows that since retail was not essential reopened in Britain in June, visitors to Londons West End are still less than 60% year on year. New treasury rules mean that a return to pre-pandemic levels may now be in doubt.
The group says the decision changes a potential 2. 2.1 billion tax-free bonus from the UK’s exit from the EU to a loss of mil 3.5 billion * in tax-free sales. That’s a $ 5.6 billion ($ 7.2 billion) net hit in the UK economy, before calculating the negative impact of the shock on broader international tourism spending, at a time when retail and tourism in Britain are failing from the pandemic.
A VAT own goal?
In his last August forecast, Visit the UK which expects tourism within the UK to drop 73% in visits but 79% down in spending to 6 billion by 2020. This represents a loss against its pre-Covid forecast of 24 billion.
If high-cost tourists choose to go to Paris, Rome or Milan instead of London to shop tax-free, the waves will be felt by hotels, restaurants and cultural attractions. The decision will clearly undermine governments’ ambitions for Global Britain, says the New West End Company. The inevitable decline in the number of international tourists and spending in the UK will reduce all other VAT revenues (total annual spending by international visitors is over 22 billion).
Protecting the changes that have come after a consultation with industry the government said it was removing tax-free sales at airports following concerns that the tax concession is not always passed on to customers at the airport. He claims that in some cases duty-free goods are returned to the country by UK residents, putting the country’s retailers at a disadvantage.
Regarding the abolition of VAT refunds for international travelers, the treasury said: Overseas visitors will still be able to purchase items without VAT in the store and send them directly to their overseas addresses.
I tha New West End Company Forbes.com that it does not seem fair that such an important decision should be made on the basis of a one-sentence question in a 22-page consultation, which focuses primarily on tax-free matters. We are therefore taking legal advice on how to better review the process and the information that led to this decision, the organization said.
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