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Fashion chiefs urge Rishi Sunak to reverse decision on Tax Free shopping

Lauretta Roberts
19 October 2020

A raft of fashion chiefs has written to Chancellor Rishi Sunak to urge him to reverse course on plans to drop Tax Free shopping for tourists once the UK formally exits the EU on 31 December.

Joining in the call for the move to be ditched are Paul Smith, Superdry, The White Company, Marks & Spencer, Ted Baker, Charles Tyrwhitt, Hackett, Johnstons of Elgin, jeweller Annoushka Ducas and Fortum & Mason, who argue that it will make the UK less attractive to high spending tourists who will spend their money in other European destinations where tax free shopping will continue to be available.

"This will be a hammer blow for the British fashion industry. Tourists spend billions of pounds in towns and cities across the country, sustaining our vibrant fashion and tourism industries, and helping our arts and culture sectors to thrive.

"Removing an incentive for international shoppers to come here will affect jobs and livelihoods throughout the UK at a time when we are already facing severe pressures brought on by the COVID-19 health crisis," the letter reads.

If Sunak continues with his plans, tourists from outside of the EU will no longer be able to claim back VAT in both retail stores and airport stores, where sales of luxury goods account for 75% of all sales. Equally UK tourists will no longer be able to claim back VAT when travelling outside of the EU.

International shoppers will still be able to claim back VAT in-store but they will not able to take the items away there and then and must have them delivered to their home address, which would mean they would be liable to import duties or taxes in their home countries.

The Government argues that the VAT reclaim scheme is costly to run and that they believe that the full tax relief is often not passed on to the customer in airports. Equally they say that UK tourists buy Duty Free items at airports and then bring them back into the country putting high street retailers at a disadvantage.

However it is argued that ditching Duty Free would not only make the UK less attractive to tourists but could end up costing the Treasury billions. More than £28bn was spent by overseas tourists in Britain Lin 2019 and £2.5 billion of VAT was reclaimed by them, according to the Centre for Economics and Business Research. The Centre has forecast that the proposed move could actually cost the Treasury £3.5bn.

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