Burberry Chair challenges Sunak on tax free as industry ups pressure for U-turn

By Luke Barras-hill |

The end of tax free shopping for tourists in January 2021, amid the pandemic, hit non-liquor and tobacco categories such as confectionery, luxury fashion, electronics and gifting.

The Chairman of luxury retailer Burberry has hit out at UK Prime Minister Rishi Sunak for making the country ‘the least attractive shopping destination in Europe’.

In an exchange with the PM at the Business Connect conference in London today (24 April), Burberry’s Gerry Murphy branded the post-Brexit withdrawal of tax- and VAT-free shopping in January 2021 – while Sunak was Chancellor of the Exchequer – ‘a spectacular own goal’, as he urged ministers to rethink the move.

He said: “It is somewhat perverse that on the day we left the Single Market, a decision […] to remove VAT refunds for tourists made the UK the least attractive shopping destination in Europe. And that is the case today.

“Virtually every other major destination in Europe offers VAT refunds and we can see the recovery in our business where we trade and the UK is by far the weakest of those major markets. We are actively exporting business as a result of that policy to our continental competitors.

In response, Sunak said: “We’re here to listen and happily see all the data. We’re always happy to look at what’s happening on the ground and see if things are panning out as expected. We don’t get everything right – nobody does. We want to make sure we’re listening, learning, adapting to deliver on the promise we see ahead for our country.”

Burberry Chair Gerry Murphy challenged PM Rishi Sunak to rethink the scrappage of tax free for tourists during the Business Connect summit in London. Source: Burberry.

Tax free campaign gets boost

Tax breaks on (non-liquor and tobacco) goods purchased post-security at airports and at other UK exit points and downtown via the VAT Retail Export (VAT RES) mechanism in Great Britain was ended in January 2021 under post-Brexit trade rules, though tourists can still avail of tax free shopping provided goods are shipped to an overseas address.

Plans to introduce a digital tax free shopping mechanism for international visitors was raised in former Chancellor Kwasi Kwarteng’s infamous ‘mini budget’ in September, before it was axed by his successor Jeremy Hunt when he took over the following month.

Hunt’s recent Spring Budget statement passed without any mention of resurrecting or revisiting VAT RES or the extra-statutory concession on airside purchases for UK departing travellers, despite a crescendo of calls from across the industry.

UK tabloid the Daily Mail has responded to those calls by launching its own prominent ‘Scrap The Tourist Tax’ campaign, drawing support from a volley of retail industry leaders in urging ministers to reconsider the decision on tax free shopping for overseas visitors [TRBusiness mounted its own high-profile campaign when tax free benefits for tourists were removed, petitioning Parliament to reverse the decision. The campaign, while ultimately unsuccessful, received more than 12,000 signatories and draw a response from HM Treasury. You can read that response by clicking here – Ed].

A letter addressed to Hunt led by Sir Rocco Forte and published via the paper’s website has attracted 68 signatories, including Sean Doyle, CEO and Chairman, British Airways; Thierry Andretta, CEO, Mulberry; Tom Athron, CEO, Fortnum & Mason; and Fraser Brown, Retail Director, Heathrow Airport.

In it, they attack the 20% VAT burden on travellers that is driving them to spend in European countries like Paris, Madrid and Milan, rather than in London.

Whitehall says that ending the mechanism will save the Treasury £2 billion a year.

A recent report from Oxford Economics commissioned by the Association of International Retail estimates that contrary to that figure, the direct cost of refunded VAT would equate to £590 million.

An expected boost in added economic activity worth £940 million in tax take would leave a net positive impact to the Treasury of £350 millionm with the potential to attract £1.6 million visitors in the first full year, the report argues.

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