Tax-free shopping is an arrangement whereby products purchased but not consumed in the country of purchase are sold VAT-free.
Post-Brexit, thousands of tourists who once flocked to the UK for tax-free shopping now visit shops in Paris, Milan, and Madrid after the UK scrapped the incentive.
Recent analysis shows that in 2019 as many as 162,000 tourists from outside the European Union claimed VAT refunds exclusively in the UK. Of these, a fifth now request refunds elsewhere in the EU, where the tax exemption is still in place.
The UK ended the tax incentive in 2021, resisting strong pressure from retailers and businesses linked to the tourism sector. Of the 34,000 tourists who moved their tax-free shopping from the UK, they increased their average spend from €2,900 ($3,622) per person in 2019 to €3,800 in 2023. France and Italy are the biggest beneficiaries of this shift, with over two-thirds of tourists traveling to these destinations, while Spain’s business sector also receives a boost.
The UK’s decision not to reintroduce tax exemption after leaving the EU is causing more damage than the recent cost of living crisis, according to the New West End Company, a lobby group representing London’s tourist areas.
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However, the UK government believes its policy has strengthened public finances and has not discouraged tourists. Independent analysis by the Office for Budget Responsibility estimated a £462 million ($579 million) benefit to public finances last year from the end of tax-free shopping, even taking into account the effect on tourism and displaced spending, rising to over half a billion pounds in the current financial year.
Tourism in the UK appears to be growing strongly, with hotel occupancy in London surpassing pre-pandemic levels and a record 18.5 million passengers passing through Heathrow in the first quarter of this year. With national elections due later this year, some luxury retailers have given up on any prospect of a change in direction.
Some retailers still make the case for the tax incentive, highlighting the opportunity to attract overseas buyers and support the UK economy.
According to a report from the Association of International Retail (AIR), the UK gave up £1.5 billion in sales as tourists headed to France, Italy and Spain in 2022. Tax-free shopping is an arrangement whereby products purchased but not consumed in the country of purchase are sold VAT-free. The tax can be requested as a refund.
On January 1, 2021, the government officially ended tax-free sales at airports, ports, and Eurostar stations.
Original article published on Money.it Italy 2024-05-23 07:02:00. Original title: Dopo la Brexit, per lo shopping meglio Milano di Londra
