UK government warned scrapping tax-free shopping could risk 70,000 jobs

Retailers have warned the government that its proposed plan to scrap tax-free shopping at the end of this year could lead to 70,000 job losses.

The UK Treasury earlier this month said that the retail scheme, which allows non-EU shoppers to reclaim VAT paid on purchases, would be scrapped at the end of December. It would make the UK the only European country to not offer tax-free shopping.

According to the Association of International Retail (AIR), that decision could result in a huge drop in spend from tourists and 70,000 retail jobs put at risk as it drives international tourists to spend their money elsewhere.

“Madrid, Milan and Paris are rubbing their hands with glee at this self-inflicted wound,” AIR chief executive Paul Barnes said, according to The Guardian. “If we charge a fifth more for the same goods, international visitors will not hesitate to switch their city breaks to other countries and the stores and jobs will follow within months.”

Decision will ‘damage the economy and Britain’s reputation’

While international tourists reclaim VAT on 2.5 billion pounds of purchases, they pay VAT on the rest of the 20 billion pounds they spend, earning the Treasury around 4 billion pounds annually.

“We believe that the decision to make the UK the only country in Europe not to offer tax-free shopping will damage the economy and Britain’s reputation and appeal as a destination for international visitors. We do not support the justifications put forward by the Treasury about costs or regional impact,” the AIR said in a statement.

“We believe there is a practical problem of managing the increased numbers if the scheme is extended to EU visitors, but that would be solved by the digitalisation of the HMRC validation element. The low level of international visitors throughout 2020 -2021 will free up capacity over the next 12-18 months under the existing system and, if necessary, the number of claims could be further reduced by raising the minimum spending limit for tax-free shopping.

“The retail industry and its partners are confident that they can provide a digital solution to the validation element, linked to existing retailer digital infrastructure, which will provide the necessary capacity and an end to end digital system, within 12 months and at no cost to the government. They have done this with many governments across the world.”

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