Heathrow claims huge financial losses due to government stoping tax-free shopping to international passengers (and those in transit)
The UK government’s decision not to offer tax-free shopping to international visitors is upsetting the airports, like Heathrow, that have benefited financially from it. In September the government announced the ability of overseas customers getting VAT-free shopping would end at the start of January 2021, as it has been a practice that is expensive to administer, and is “a costly relief, which does not benefit the whole of Britain equally”, and the current use is mostly centred in London. Also that that retailers who offer the service are putting other high street retailers at a competitive disadvantage. Heathrow’s PR machine is trying to call this a “tourist tax” and is whingeing about it. Normally a tourist tax means a small amount that visitors pay to stay overnight in accommodation abroad – that sort of thing. The removal of the VAT perk for airport shops, and thus indirectly for Heathrow (paid by the shops) is not a tourist tax. But it is likely to reduce the amount of sales in airport shops. Heathrow claims 2,000 jobs could be lost? Various retailers affected (including Marks & Spencer, Mulberry, Paul Smith, Ted Baker) have written to the chancellor to express their opposition to the new tax rules.
Heathrow could lose 2,000 retail jobs because of ‘tourist tax’
UK government’s decision not to offer tax-free shopping to international visitors criticised
By Mark Sweney @marksweney (The Guardian)
Fri 11 Dec 2020
Heathrow airport says the ‘tourist tax’ could be the ‘final nail in the coffin’ for many struggling businesses in the retail and hospitality sectors.
Heathrow could lose 2,000 retail jobs because of the government’s decision not to offer tax-free shopping for tourists, according to the airport’s chief executive.
John Holland-Kaye said the move, which will make the UK the only country in Europe to have a “tourist tax” on international visitors, could be the “final nail in the coffin” for many struggling businesses in the retail and hospitality sectors.
He said: “2021 should be the year of Britain’s economic recovery but recent announcements, such as the tourist tax, could be the final nail in the coffin for struggling businesses such as restaurants, hotels and theatres that rely on inbound tourists, as well as for retailers.”
Passenger numbers at Heathrow fell by 88% in November as travel restrictions and a second coronavirus lockdown took their toll. Cargo flights were also well down. The airport said that based on current forecasts and a continued decline in passengers, it had decided that Terminal 4 would remain nonoperational until the end of next year.
Holland-Kaye said the industry needed government support including full business rates relief for all UK airports and abandoning the “tourist tax”.
Heathrow has partnered with British Airways, American Airlines, United Airlines and Virgin Atlantic on a cross-industry study aimed at eradicating the need for quarantine for passengers. The study is aiming to prove the effectiveness of pre-departure testing in reducing transmission while making free movement easier.
“To make global Britain a reality, the government should be helping the aviation sector to survive, to develop routes to our key trading partners and attract businesses and tourists to come to Britain to spend their money,” Holland-Kaye said.
Under new tax rules being introduced by the chancellor, Rishi Sunak, overseas visitors will no longer be able to benefit from tax-free sales and VAT relief on goods purchased in the UK from 1 January. The government has said that continuing to offer tax-free shopping is too expensive to administer, and that retailers who offer the service are putting other high street retailers at a competitive disadvantage However, trade bodies and retailers have all opposed the change.
The bosses of retailers including Marks & Spencer, Superdry, Mulberry, Paul Smith, Ted Baker, Charles Tyrwhitt and Hackett have written to the chancellor to express their opposition to the new tax rules.
Scottish business leaders have said the changes represent a “clear and present risk” to tourism and jobs in the UK and have called on Sunak to “urgently reconsider” the decision.
Heathrow is facing strike action by workers this month over “fire and rehire” plans that have cut the wages of long-serving staff, in an increasingly bitter dispute.
In October, Heathrow lost its place as Europe’s busiest airport for the first time after being overtaken by Paris’s Charles de Gaulle.
Heathrow demands Rishi Sunak ends “disastrous” tourist tax on Duty Free shoppers as passenger numbers crash
By Jim Armitage @ArmitageJim (Evening Standard)
Heathrow Airport today demanded an end to the Rishi Sunak’s “disastrous” tourist tax on long haul travellers as it reported on an 88% crash in passenger numbers last month.
The airport called for targeted support of the airport sector to protect jobs and help drive the economic recovery.
It said: “These include full business rates relief for all UK airports and abandoning the disastrous tourist tax which will make the UK the only country in Europe not to offer tax-free shopping for international visitors.”
He warned the tourist tax would result in 2000 job losses at Heathrow shops alone.
The Evening Standard has been campaigning for the government to repeal its surprise decision to scrap decades of duty free allowances on tourists from outside the EU in the hope of raising £500 million of extra VAT income.
The net effect of the move, after accounting for the expected cancellation of visits and shopping trips by long haul travellers is expected to be a tax shortfall of £3.4 billion, according to analysts Global Blue.
Total spending in UK shops, hotels and restaurants is expected to fall £6 billion from the move.
Heathrow chief executive John Holland-Kaye said: “2021 should be the year of Britain’s economic recovery. But recent announcements, such as the tourist tax, could be the final nail in the coffin for struggling businesses such as restaurants, hotels and theatres that rely on inbound tourists as well as for retailers.”
He added: “To make ”global Britain” a reality, the government should be helping the aviation sector to survive, to develop routes to our key trading partners, and attract businesses and tourists to come to Britain to spend their money.”
The government argues that the tax, which comes in the form of an abolition of VAT refunds on UK shopping, predominantly helps London and Oxford.
However, MPs and business leaders across the UK in areas from Manchester and York to Scotland have loudly complained it will hit their tourist-dependent businesses as well, from manufacturing to retail.
Total job losses are estimated to be upwards of 40,000 as employers suffer declines in tourist numbers and spending.
Industry is calling on the government to repeal the move, which it has put into parliament as a statutory instrument with barely any parliamentary scrutiny.
Businesses argue the consultation period was deeply flawed, with the drastic proposal meriting only a fleeting mention in a far wider discussion document issued to industry at the height of the Covid pandemic in Spring.
In response to a Parliamentary question on 17th December on the ending of the loss of duty-free sales:
Lord Agnew of Oulton Minister of State (HM Treasury), Minister of State (Cabinet Office) Details about Lord Agnew
Ahead of the end of the transition period, the Government has announced the excise duty treatment of goods purchased by individuals for personal use and carried in their luggage arriving from or going overseas (passengers). The following rules will apply from 1 January 2021:
– Passengers travelling from Great Britain to any destination outside the United Kingdom (UK) will be able to purchase duty-free excise goods once they have passed security controls at ports, airports, and international rail stations.
– Personal allowances will apply to passengers entering Great Britain from a destination outside of the UK, with alcohol allowances significantly increased.
The Government published a consultation which ran from 11 March to 20 May. During this time the Government held a number of virtual meetings with stakeholders to hear their views and received 73 responses to the consultation. The Government is also continuing to meet and discuss with stakeholders following the announcement of these policies.
The detailed rationale for these changes are included in the written ministerial statement and summary of responses to the recent consultation: https://questions-statements.parliament.uk/written-statements/detail/2020-09-11/hcws448 and https://www.gov.uk/government/consultations/a-consultation-on-duty-free-and-tax-free-goods-carried-by-passengers.
A technical note has also been issued to stakeholders to expand on this document and to respond to issues raised by stakeholders.
On 25 November the independent Office for Budget Responsibility (OBR) set out their assessment of the fiscal impact of the withdrawal of the tax-free airside sales. The OBR estimate that the withdrawal will raise approximately £170 million per year for the Exchequer, after behavioural responses are taken into account and passenger numbers recover from the impacts of COVID-19.
The Government recognises the challenges the aviation sector is facing as it recovers from the impacts of Covid-19 and has supported the sector throughout the pandemic, and continues to do so, including schemes to raise capital, flexibilities with tax bills, and financial support for employees.
Tax-free sales by airports, ports etc for overseas visitors to end by 1st Jan 2021, with lower duty-free import allowances
The UK government is set to end tax-free sales at airports, ports and Eurostar stations from 1 January 2021. As the Brexit transition period comes to an end, the UK government cited “concerns over how the benefit is passed on to passengers and in some instances, the relief is not consistent with international tax principles.” The VAT retail export scheme, which currently enables EU visitors to claim refunds on goods purchased in the UK, will also be withdrawn from the same date. The airports are unhappy about this, as it will cut their income, and some jobs would be lost. The Treasury said: “Overseas visitors – including in the EU – will still be able to buy items VAT-free in store and have them sent direct to their overseas addresses, while the costly system of claiming VAT refunds on items they take home in their luggage will be ended.” It described the scheme as “a costly relief, which does not benefit the whole of Britain equally”, adding that the current use is mostly centred in London. Visitors arriving from EU and non-EU countries will be allowed 42 litres of beer, 18 litres of still wine and 9 litres of sparkling wine duty free from 1.1.2021 (much lower than currently).