UK to end VAT-free shopping for visitors on Jan 1

22 Oct '20
2 min read
Pic: Shutterstock
Pic: Shutterstock

The British government announced earlier this month it will end value added tax (VAT)-free shopping for international visitors by December 31, when the Brexit transition period ends. Under the VAT Retail Export Scheme (VAT RES), international visitors to the United Kingdom can reclaim the VAT they pay on goods purchased but not consumed there.

The government’s argument is that the scheme offered little benefit to many parts of the United Kingdom and was inconsistent with international norms. The Treasury says the tax relief is costly and vulnerable to fraud.

About £3.5 billion in tax-free sales are made to non-European Union (EU) tourists each year.

However, travel and retail companies have cautioned the decision could cost the country billions of pounds in lost income. In a recent letter to chancellor of the exchequer Rishi Sunak, the heads of firms like Marks & Spencer, Heathrow and Selfridges said the move also puts 70,000 jobs at risk, according to British media reports.

It benefits tourist hotspots like London and Edinburgh, as well as the famous Bicester shopping village in Oxfordshire, which attracts visitors seeking bargains.

Critics say the Treasury fears that under World Trade Organisation rules, the United Kingdom would also have had to extend the scheme to EU visitors after the transition period, creating an overwhelming administrative burden on the tax authorities.

The Association of International Retail (AIR), which co-wrote the letter, urged the chancellor to "look again at this devastating decision". It cautioned the United Kingdom will become the only European country not to offer VAT-free shopping for international visitors.

"Madrid, Milan and Paris are rubbing their hands with glee at this self-inflicted wound," said AIR boss Paul Barnes.

"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," he was quoted as saying.

Fibre2Fashion News Desk (DS)

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