Lawmakers to Debate Return of Tax-free Shopping in U.K.
LONDON — Lobby groups, retailers and luxury businesses have scored a win in their battle to restore tax-free shopping to the U.K. with a parliamentary debate on the issue set for Sept. 7 at Westminster Hall.
The U.K. Treasury will hear and formally respond to proposals to reinstate tax-free shopping for international visitors during a 90-minute debate by around 50 parliamentarians.
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The debate in the presence of the Treasury is the result of a campaign by the Association of International Retail and New West End Company, which oversees hundreds of retail and hospitality businesses around Regent and Oxford Streets.
The organizations have teamed with Sir Geoffrey Clifton-Brown, a member of Parliament who will open the debate and argue the retailers’ cause.
“It is really important that this subject is thoroughly debated in Parliament, which will hopefully send a strong message” to the government ahead of the autumn budget, said Clifton-Brown.
Until now the U.K. Treasury has argued the scheme would cost the country 2 billion pounds in lost tax revenue. Businesses, by contrast, believe the tax incentive would contribute more than double that amount to GDP in addition to creating jobs and turning Britain into a tourist hot spot once again.
Dee Corsi, chair of the Association of International Retail and chief executive officer of the New West End Company, said the “tourist tax” has already had a negative effect on many businesses in the West End and beyond, as retailers, hospitality and leisure providers “grapple with the loss of spend being diverted” across the English Channel.
Corsi said that despite the return of international visitors to the U.K., spending data “consistently shows that Britain is underperforming when compared to the rest of Europe.”
She argued that if the tax-free scheme were to be reinstated, Britain could potentially see a “huge new tourism market” open. “We cannot mitigate the damage already done by this ‘tourist tax’, but we can still avert long-term, damaging changes in shopper behavior,” she said.
In 2021, in the wake of Brexit, the Conservative government scrapped the scheme that allowed international visitors to claim back 20 percent value-added tax (VAT) on goods purchased in the U.K. From that moment Britain became the only country in Europe not to offer tax-free shopping to international shoppers.
The move was a blow for the big fashion and luxury retailers, some of which had set up tax-free offices inside their stores where customers could complete the paperwork.
Before the pandemic, tax-free operator Global Blue had even opened a VIP shopping lounge on Albemarle Street catering to Chinese customers in particular.
According to a report commissioned by the lobby groups from Oxford Economics, the reintroduction of tax-free shopping would boost the economy by more than 4 billion pounds each year, and support 78,000 jobs.
Over the past two years brands including Burberry, Mulberry, Boodles and Value Retail have all joined the growing chorus of voices calling for the scheme to be reinstated.
Some have put their case directly to the Treasury while others have criticized the “tourist tax” publicly during quarterly results presentations. Others still have taken the issue straight to Prime Minister Rishi Sunak.
In April, Burberry chairman Gerry Murphy told Sunak the scheme was a “spectacular own goal” that had made Britain the “least attractive” shopping destination in Europe, according to British press reports.
Murphy voiced his opinions at a Business Connect conference, where hundreds of chief executives were able to air their views to the prime minister.
Brands and lobby groups also argue the repeal of the VAT refund scheme has had a domino effect on hotels, restaurants and other hospitality businesses.
International tourists, they say, are opting not to visit the U.K. or are cutting their trips short and shopping in places such as Milan and Paris, which have long-standing tax-free schemes in place.
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