London’s Evening Standard newspaper devoted a double page spread to an appeal for the government to reverse its decision over VAT refunds for tourists to Britain.
“Rishi Sunak’s tourist VAT tax will kill jobs and hold back the economy’s recovery from coronavirus,” the campaigning article was headlined.
Former chancellor George Osborne is the editor of the Evening Standard.
It continued in the form of a letter to the chancellor by business editor Jim Armitage against the axing of VAT rebates on luxury goods like watches. “We will be pretty much the only country in Europe not to offer such perks to tourists,” he writes.
“The difference they’ll see in UK prices is huge. For a £10,000 watch in a Bond Street jeweller, shoppers will lose a £2,000 VAT discount,” Mr Armitage notes.
“Shops, designers and tourism chiefs are convinced the tax will put visitors off coming to Britain and send them to Paris and Milan instead,” he adds.
Ministers have made the case that ending the tax-free shopping for tourists is closing a loophole that is costing the Treasury £524 million per year, and that it is mainly the wealthy that benefit from the perk.
Global Blue, which helps shops and shoppers take advantage of the tax free shopping, estimates that the real cost of losing tourist spending for hotels, restaurants and retail will be around £3.4 billion and the total loss to the UK economy could be 6 billion.
High spending tourists, led by the Chinese, often visit several countries on visits to Europe, and tour operators are experts at advising where the best places to shop are. When it comes to watches, Switzerland benefits from being the home of the global industry and other countries jostle over tax rates, the affect of currency variations, availability of the best watches and the quality of the shopping experience.
There was a spike in luxury watch sales in the UK after 2016’s vote to leave the EU caused the pound to weaken and gave this country a 25% price advantage over European neighbours.
That advantage was quickly addressed by brands raising prices in the UK, but the country remained competitive for non-EU visitors (who cannot claim back VAT).
The French are seeing an opportunity to make Paris the chosen shopping destination for well-healed tourists, at the expense of London, York, Stratford, Windsor and Edinburgh.
Within days of the UK government publishing its plan to cut VAT rebates, French President Emmanuel Macron declared that visitors should come to France instead, and slashed the value of goods on which VAT can be reclaimed from 175 euros to 150 euros. Ireland is planning something similar, Mr Armitage says.
Retailers, including leaders of the UK’s largest jewellery chains, have been lobbying government for a U-turn, but the policy is so far still expected to be triggered in January.
There is also a petition on the Parlianment’s website where people can register their views at https://petition.parliament.uk/petitions/555140.