The Government must approve a new tax-free shopping regime at airports which works for jobs, for the economy, and for the Treasury, and can be implemented at no cost to the taxpayer by 1st January 2021. By taking this approach, the Government will ensure a level playing field with our European competitors, protect jobs across the UK throughout this pandemic, and, boost the national recovery. York Aviation research suggests a new airside tax-free shopping regime would deliver a Brexit boost of up to £1.1 billion of economic growth and support the creation of over 10,000 new jobs – mostly outside of London.
Failure to introduce a new airside tax-free shopping regime will jeopardise the Government’s Global Britain ambitions as other European countries such as France and Ireland have expanded their tax-free shopping eligibility recognising it will make them more attractive to travellers in a post-Brexit world. The Office of Budget Responsibility believes that in withdrawing tax-free shopping “there will also be costs as the UK becomes less attractive for affected tourists relative to alternative EU destinations such as Paris or Milan.”
It will also undermine the Government’s national recovery efforts and levelling-up agenda as regional airports rely most heavily on retail revenue and any retailers with stores across the UK will likely make closures outside of London first. Equally, premium British brands such as Burberry, Mulberry and Johnston’s who have significant regional manufacturing operations will be directly negatively impacted by this decision as demand falls.
The Chancellor has been clear that the Government’s highest priority is to protect jobs and livelihoods throughout this pandemic. He has acted to extend the Coronavirus Job Retention Scheme and support for businesses to give the British people comfort over what will be a difficult winter. However, workers of travel retailers and airports across the UK that are already on their knees and rely heavily on the spend of international visitors will not feel the arms of Government around them. These reeling sectors will be forced to permanently cut thousands of jobs from 1st January as a result of a Treasury decision to abolish tax-free shopping at airports and the VAT refund scheme.
Travel retailers and airports across the country are unified in their resolve to propose a new tax-free shopping regime (for EU and non-EU travellers) which addresses the Government’s concerns and delivers for all of the UK. Our proposal to Ministers is set out below, and we would welcome a periodic review of the effectiveness of these measures and identify further improvements if required:
Apply a reduced rate of VAT to all airside sales below a threshold, thereby addressing concerns around not all goods being exported.
Retain a zero rate to all airside sales on items above the threshold, with passengers obliged to confirm that the goods will not be reimported into the UK without VAT. This abides with the principles of VAT (as a border-adjusted tax) and retains the attractiveness of UK retail to tourists while protecting the Exchequer from abuse.
Oblige all airside retailers to pass on the full benefit of the relief to their customers through lower prices, as most do already.