End of UK duty-free will cost ‘billions’, say Gucci and Tiffany

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End of duty-free ‘will cost billions’: Luxury goods firms including Gucci and Tiffany warn that ending VAT refunds will hit UK economy hard

  • Rishi Sunak is ending VAT refunds for international visitors to British shops  
  • It is estimated the move could cost the economy up to £3.5billion  
  • 11 leading luxury firms have written to Chancellor warning him about the move

Eleven top luxury brands, including Gucci, L’Oreal and Tiffany, have warned that the end of duty-free shopping will cost billions and hit the UK economy at the ‘worst possible time’.

Chancellor Rishi Sunak is ending VAT refunds for international visitors to British shops from January 1.

It is estimated the move could lead to up to 138,000 job losses and cost the economy £3.5billion. British holidaymakers will also be hit by extra taxes at the till as savings for travellers leaving the UK will be restricted to alcohol and tobacco.

Today 11 leading luxury firms wrote to the Chancellor, warning the move could cost Britain its place as a world-leading tourism and shopping destination. They said the tax hike makes the UK ‘the least competitive duty-free regime in Europe’.

Chancellor Rishi Sunak is ending VAT refunds for international visitors to British shops from January 1

The firms, including clothes giant Hugo Boss, watch maker Breitling and diamond specialist De Beers, warned the move will cost the Treasury ‘billions of pounds in revenue’ as tourists will spend their cash on the continent instead.

The letter, seen by the Mail, reads: ‘We were deeply troubled to hear of the UK Government’s proposal to end tax-free shopping. 

‘We greatly value Britain’s status as a world-leading shopping and tourism destination and have invested in the UK accordingly…but the Treasury’s plan would put this status at risk. We operate globally and understand the price sensitivity of international visitors.

It is estimated the move could lead to up to 138,000 job losses and cost the economy £3.5billion. Pictured: Duty free shop at Heathrow airport

It is estimated the move could lead to up to 138,000 job losses and cost the economy £3.5billion. Pictured: Duty free shop at Heathrow airport

It is estimated the move could lead to up to 138,000 job losses and cost the economy £3.5billion. Pictured: Duty free shop at Heathrow airport

‘The introduction of a 20 per cent tax will result in these visitors opting to spend their money elsewhere in Europe rather than in the UK. We believe that in the midst of the economic disruption caused by the global pandemic this would be the worst possible time to disincentivise visitors from coming to the UK.’ 

Other firms behind the letter include glass maker Lalique and knitwear specialist Missoni. The Treasury says airports do not always pass savings on to consumers and the in-shop VAT refund scheme is ‘costly’.

Officials claim that ending the incentive will save taxpayers £1billion. Dozens of companies, including Ted Baker, Fortnum & Mason, Boots, Dixons and Marks & Spencer, have already lashed out at the tax increase ‘hammer blow’.

Eleven top luxury brands, including Gucci, L'Oreal and Tiffany, have warned that the end of duty-free shopping will cost billions and hit the UK economy at the 'worst possible time'

Eleven top luxury brands, including Gucci, L'Oreal and Tiffany, have warned that the end of duty-free shopping will cost billions and hit the UK economy at the 'worst possible time'

Eleven top luxury brands, including Gucci, L’Oreal and Tiffany, have warned that the end of duty-free shopping will cost billions and hit the UK economy at the ‘worst possible time’

Official figures this week showed just 398,000 tourists arrived in the UK between April and June – a reduction of 96 per cent. 

Heathrow Airport said the decision to end duty-free shopping could cost tens of thousands of jobs in the aviation industry. Luxury products account for as much as three-quarters of total sales in airports.

The Treasury 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.’ 

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