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Ax to fall on tax-free sales

By BO LEUNG in London | China Daily Global | Updated: 2020-09-17 09:56
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A traveller wearing a face mask walks at the Terminal 5 at Heathrow Airport, as the spread of the coronavirus disease (COVID-19) continues, in London, Britain, July 26, 2020. [Photo/Agencies]

International travelers looking to get a tax rebate on their shopping when they visit Britain will be disappointed after the United Kingdom's Treasury announced plans to withdraw the VAT retail export program next year.

The change means visitors will not be able to get a 20 percent tax refund at the airport for their purchases when leaving the country.

"VAT refunds for overseas visitors in British shops will be removed," the UK Treasury said. "Overseas visitors will still be able to buy items VAT-free in-store and have them sent direct to their overseas addresses, while the costly system of claiming VAT refunds on items they take home in their luggage will be ended."

The government is also ending tax-free sales in airports on items such as electronics and clothing for passengers traveling to non-European Union countries from January.

This comes "following concerns that the tax-concession is not always passed on to consumers in the airport".

"In some instances, these tax-free goods are brought back into the country by UK residents, putting high-street retailers at a disadvantage," the Treasury added.

The changes will come into effect when the Brexit transition ends on Jan 1.

UK retailers, tourism businesses and airport operators have criticized the move, with the European Travel Retail Confederation, which is also known as the ETRC, saying it is "a threat to all our businesses".

"The proposal from the United Kingdom to remove VAT relief from sales to international passengers leaving the UK poses a threat to us all," said Nigel Keal, president of the ETRC. "VAT-free sales are a cornerstone of the duty-and tax-free industry. If adopted, this proposal would dismantle the framework upon which our industry operates, and eventually threaten the viability of the entire aviation ecosystem."

Karl McKeever, a retail analyst and director of retail agency Visual Thinking, said airports in the UK have been "transformed" with the addition of luxury brand boutiques so the government's decision to scrap the VAT refund program will harm retail sales as "the 'cash benefit' of last-minute airport shopping is removed".

"Of course, coming at this time, when airlines and airports are suffering deep losses as a result of the coronavirus crisis, will come as a further blow to an industry in crisis," McKeever said. "I predict, that, over time, there will be a gradual rebalancing of airport space and facilities as a result.

"Operational costs for brands in these environments is incredibly expensive, and relies on strong sales volumes and profitability to keep the outlets viable. If and when sales reduce, some brands will re-evaluate whether they want to remain onsite, when the costs to operate may outweigh the benefits of trading there."

Meanwhile, British passengers traveling to EU countries will be able to buy duty-free alcohol and tobacco products in British ports, airports, and international train stations, and aboard ships, trains, and planes.

The government said the amount that passengers bring back with them from non-EU countries will also be significantly increased, and extended to EU countries.

It said: "Passengers coming to Britain will be able to bring back, for example, three crates of beer, two cases of still wine, and one case of sparkling wine to GB without paying UK duties."

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