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Treasury Committee calls for evidence behind Chancellor’s decision to scrap duty free shopping

Sadiyah Ismailjee
09 October 2020

The Treasury Committee has demanded to see evidence behind Chancellor Rishi Sunak’s decision to scrap duty free shopping for tourists and international visitors.

Last month, the government announced it would end tax-free sales on electronics and clothes at airports, after the UK leaves the EU. The changes will come into force when the Brexit transition ends in January 2021, include extending duty-free shopping to British passengers travelling to the EU.

Chairman Mel Stride has written to the Chancellor asking for the cost analysis of the VAT overhaul.

An evidence session this week highlighted concerns about the clarity of the consultation process, as well as demands from retailers to reconsider the move.

Stride said MPs on the committee have been warned that the changes could affect a number of retailers in the already-struggling tourism sector.

Stride said: "The Committee has been told that this will be a major blow to many retailers serving the struggling tourism sector. It could be seen as the UK imposing a tariff on its own exports."

“Witnesses in a Treasury Committee evidence session yesterday raised concerns about the government’s consultation that drove these changes to VAT. I’ve asked the Chancellor to provide the Committee with the cost benefit analysis behind these decisions so that we can consider these issues further.”

For many small British independent retailers which have a physical store and online presence, the decision could be detrimental for trade in physical stores.

Co-founders of The Camden Watch Company, Anneke Short and Jerome Robert commented: "We are currently using the online sales to pay for our physical stores, to keep our employees on. So if a tax like this would be for businesses like us we couldn’t allow ourselves to keep the stores and our employees. We would have to let them go and use our breaking clauses. A move like this would be bad for brick and mortar stores and for employment."

"Along with small independent’s like ourselves who are keeping afloat, this would also be harmful for the bigger retails who operate online and physical with many of those businesses having to close their physical stores."

The changes will stop overseas visitors from reclaiming VAT on luxury purchases in the UK.

International consumers can apply for a refund in airports before departure, however once the rules come into force next year this will no longer be possible.

The Treasury argued visitors could instead recoup the tax by posting the products home directly from shopping centres.

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