Top luxury brands warn Chancellor that abolishing duty-free sales during the Covid-19 pandemic will further endanger thousands of retail jobs
- Sixteen companies said scrapping VAT refunds for international store visitors would hit the fashion industry hard
- Their warning comes after investigations uncovered the devastation retailers are facing this year, with a record 11,120 chain stores closing in the first six months.
Top luxury brands, including Ted Baker and Fortnum & Mason, have warned the Chancellor that the abolition of duty-free sales during the Covid-19 pandemic will further endanger thousands of retail jobs.
In an open letter to Rishi Sunak, 16 companies said scrapping VAT refunds for international store visitors would be a major blow to the fashion industry “at a time when it cannot afford it.”
Their warning comes after research uncovered the devastation retailers are facing this year, with a record 11,120 chain stores in the first six months.
Warning: Ted Baker and Fortnum & Mason are among 16 companies lobbying Chancellor Rishi Sunak
Due to the changes on January 1, visitors from outside the EU will no longer be able to claim a VAT refund for goods such as perfume, clothing and electronics purchased in stores. British holidaymakers who travel outside the block also lose tax credits.
The Treasury claims the turmoil will save the public purse £ 1 billion. But it is facing a chorus of opposition from companies including Boots, Dixons Carphone, Heathrow Airport, Marks & Spencer and 600 West End companies, who say it will further hurt sales in a time of pandemic. In their letter, luxury brand bosses, including Chrissie Rucker’s White Company, Paul Smith, Charles Tyrwhitt and Superdry, urged the Chancellor to change course.
They said, ‘This is going to be a hammer blow for the British fashion industry. Tourists spend billions of pounds in towns and cities across the country to sustain our vibrant fashion and tourism industries and to help our arts and culture industries thrive.
“Taking away an incentive for international shoppers to come here will affect jobs and livelihoods.” Duty-free shopping is already hit by international travel restrictions this year.
Luxury brands have also warned travelers are “extremely price sensitive” and that ending VAT refunds will only “encourage them to spend their money in Paris, Milan or Madrid.”
They fear that the UK will become the only country in the developed world that does not offer travelers tax-free shopping, putting it at a major disadvantage.
Luxury product sales can account for as much as 75 percent of total airport sales. However, the Treasury said its decision was made “after concerns that the tax benefits are not always passed on to consumers at airports,” while the in-store VAT refund scheme was “expensive.”
Yesterday, a spokesperson added, “We are investing billions to support businesses across the country through our jobs plan. Less than 10 percent of non-EU visitors to the UK use the VAT refund shopping scheme and extending it to EU visitors could cost up to £ 1.4 billion a year.
“Foreign visitors can still buy VAT-free in the store and have them shipped directly to their foreign addresses.”