Sep 30, 2020
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End of UK tax-free shopping could hit jobs - report

Sep 30, 2020

New data released on Wednesday supports widespread disapproval of the UK government’s plan to scrap tax-free shopping at the end of the year.

According to a report from the Centre for Economic and Business Research, the decision could trigger up to 138,000 job losses across the retail, manufacturing and tourism sectors.

Nearly all overseas shoppers (93%) said they would spend less in stores on their next visit to the UK if the scheme comes to an end. Known formally as the VAT Retail Export Scheme, the programme allows international visitors to reclaim the sales tax they paid on goods bought in Britain, and is a major driver of luxury sales in London.

The government’s low-key announcement earlier this month sparked fierce criticism from retailers and trade bodies, who urged policymakers to reconsider the decision over fears it could have a devastating effect on Britain’s appeal as a global retail destination.  

The new CEBR survey, published by The Daily Telegraph, found that 60% of tourists would be put off from visiting Britain. This could lead to retailers losing out on at least £6 billion in spending a year, the CEBR estimated.

Tax-free shopping is being scrapped for being too costly and vulnerable to fraud, with the government planning to replace it with a new system that it says will bring the UK in line with international norms. But given that a huge number of European and other countries offer tax-free shopping, it's unclear what those norms are. In fact, the concept of "international norms" seems odd as the move will mean the UK will be the only country in Europe not offering tax-free shopping.

Paul Barnes, chief executive of the Association of International Retail, told The Telegraph: “Making the UK the only European country not to offer [it] to international visitors sends totally the wrong message to the world. And it needlessly damages the UK’s retail, tourism and manufacturing industries, already struggling to survive Covid-19.”

Several retail firms including Marks & Spencer, Harrods and Selfridges have signed a letter to the Chancellor to complain about the decision.

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