The UK government stopped tax-free shopping for tourists in January 2021, following the country’s decision to leave the European Union and as it tried to tackle the country’s parlous financial state.
The boss of high-street fashion retailer Kurt Geiger is urging the UK’s July-elected Labour government to bring back the tax exemption for purchases by non-UK visiting tourists, because of the cost business.
The Tourist Tax was introduced in January 2021 after the UK left the EU. It replaced the end of the VAT Retail Export Scheme, which allowed non-EU tourists to claim back 20% value-added tax (VAT) on items purchased from UK participating retailers.
According to the Centre for Economics and Business Research (CEBR), the end of tax-free shopping has resulted in a £10.7bn (€12.70bn) loss in Gross Domestic Product (GDP), as well as two million fewer tourists visiting the UK per year.
Shoppers from China, the US and the Middle East are instead going to neighbouring European countries such as Paris and Milan, it reported.
Neil Clifford, Kurt Geiger’s CEO was quoted in The Times as saying: ‘”International tourists, whether it be Middle Eastern or American travellers, are spending less time in London. If you go to Milan or Paris or Madrid – my team and I are in those markets often – there’s no doubt they’re busier.”
Urgent call to bring back tax-free shopping
The UK is still trying to recover from losses caused by both the pandemic and the subsequent inflation rises as a result of geopolitical conflict including the Russia-Ukraine war and the Israel-Hamas conflict. The UK luxury sector’s official body, Walpole, has recommended introducing a digital tax-free shopping scheme and a duty-free arrivals scheme to encourage spending.
Marco Passoni, senior executive vice president at luxury and fashion brand consulting firm 2.0& Partners, said as reported by DFNI: “Now we have a new UK government, it is time to talk once more about putting an end to the UK’s damaging Tourist Tax.
“To keep this devastating policy in place would be madness. We cannot afford for the UK’s future and recovery to be stunted by a short-sighted and ill-conceived plan which has backfired so clearly and is now doing real harm to the country’s finances and global standing.
“I know I will not be alone in urging our new Prime Minister [Keir Starmer] and his team to put this change high on their list.”