More than 40 Tory MPs have warned Rishi Sunak that axing duty-free shopping could cost up to 50,000 jobs.
They say the Chancellor’s decision to scrap the system next year will make Britain less attractive to international visitors.
The move could affect not just London, but airports and shopping centres throughout the country including in Edinburgh, Manchester and Bicester Village. Luxury brands including Burberry, Mulberry and Church’s may also be hit.
The MPs warn that wealthy visitors they describe as ‘super spenders’ will desert London for Paris and Milan. Pictured: Shoppers in Harrods
In the letter, seen by the Mail, the MPs write: ‘We believe this tax rise will … set back the Government’s levelling-up agenda and damage our ambitions for a global Britain.’
They warn that wealthy visitors they describe as ‘super spenders’ will desert London for Paris and Milan.
The Treasury says the scheme mostly benefits the capital and does not support the levelling-up agenda.
More than 40 Tory MPs have warned Rishi Sunak that axing duty-free shopping could cost up to 50,000 jobs
But industry groups argue tax-free shopping is worth £3.5billion a year and supports 70,000 jobs directly. They predict a drop of 1.16million visitors a year, mostly from China and the Middle East.
Sir Geoffrey Clifton-Brown, who is leading the MPs, said: ‘Once we leave the EU, the World Trade Organisation has indicated that we can’t offer duty-free shopping or VAT reclaim to non-EU residents without offering it to EU residents. The number of EU residents is quite large, and so the Treasury has indicated that it will not be worthwhile.
‘However, we believe that the Treasury has overestimated the loss of VAT it will suffer from EU shoppers. If it’s not as attractive to come here, these shoppers will simply book into a nice hotel and go for a night at the opera in Paris rather than London.’
Tory MP Nickie Aiken, who represents the Cities of London and Westminster, said: ‘It’s not about the West End, it’s not about London, it’s about airlines, manufacturing’
Tory MP Nickie Aiken, who represents the Cities of London and Westminster, said: ‘It’s not about the West End, it’s not about London, it’s about airlines, manufacturing. We need to be able to encourage as many of our international visitors back to these shores.’
The issue was raised with Mr Sunak in a 1922 Committee meeting of Tory backbenchers last Wednesday evening.
A Treasury spokesman said: ‘Around 92 per cent of visitors to the UK don’t use the VAT retail export scheme and extending it to the EU could increase total costs up to £1.4billion a year.
‘Tax-free shopping is still available in store when goods are posted to overseas addresses. This is getting rid of a tax cut that mainly benefits foreign billionaires.’
WHY WE MUST REMAIN OPEN FOR BUSINESS
BY ALEX BRUMMER CITY EDITOR
Boris Johnson’s Government will shoot itself in the foot if it persists in pressing ahead with a Treasury plan to suspend VAT refunds for overseas visitors to the UK.
The policy flies directly in the face of the ‘Global Britain’ slogan adopted following the Brexit referendum.
There could be no worse time to penalise the shopping emporia favoured by foreign tourists to the UK.
Bicester Village in Oxfordshire, (pictured in 2019) with its cluster of luxury shops selling the finest goods at a discount, has been a magnet for tourists to the UK
Bicester Village in Oxfordshire, with its cluster of luxury shops selling the finest goods at a discount, has been a magnet for tourists to the UK.
It is the favoured choice of visitors from China and the broader Asia-Pacific who delight in British and overseas designer labels from Paul Smith and Burberry to Dior.
With much of the world’s air traffic grounded and non-essential shops in England trapped in a second lockdown, the most famous names in British retail are gasping for air. Not only is Bicester suffering but so are upmarket shopping centres such the Westfield malls up and down the country and some of the most celebrated names in UK retail from Selfridges to Fortnum & Mason.
Even mighty Harrods, in London’s swish Knightsbridge, has been forced to lay off some 700 staff. The concern is that if the VAT tax break is removed well-heeled visitors to the UK from around the world will divert to Paris, Milan or Berlin.
Not only is Bicester suffering but so are upmarket shopping centres such the Westfield malls up and down the country and some of the most celebrated names in UK retail from Selfridges to Fortnum & Mason (pictured in 2019)
One can understand why the Treasury, in a desperate search for new tax revenues to help close a bruising budget deficit of £400billion this year, is anxious to close loopholes.
It believes that as much as £1.4billion of VAT revenues could potentially be lost after Brexit because European visitors could also take advantage of the 20 per cent refund on purchases. The timing of the proposed clampdown in January 2021 is terrible.
Economic experts are counting on a robust recovery of the economy next year as Covid-19 test and trace becomes more effective and the first vaccines are available.
Rejuvenation of the travel, tourism and hospitality enterprises, which are a large part of the UK’s services-driven commerce, is essential to prosperity, living standards and jobs.
Even mighty Harrods (pictured), in London’s swish Knightsbridge, has been forced to lay off some 700 staff
Some 4.96million tourists from outside the EU visit Britain each year with more than 1.2million taking advantage of the scheme. The fear is that if VAT is imposed some 138,000 jobs could be placed in jeopardy and some of most famous names in British shopping – known around the world – could collapse.
Air traffic would be diverted to other European capitals, hotels in the biggest cities across the country could suffer and tourist destinations would be bereft of business.
There is a well of opinion sympathetic to the case for ditching the proposed policy inside Whitehall’s Culture and Business departments.
Rishi Sunak and HMRC must beat an urgent retreat from a plainly anti-Tory and free enterprise policy which would deprive the nation of valuable foreign currency and jobs.