Luxury industry fights to keep tourists in UK post Brexit

Bloomberg

England’s luxury stores will have more than Christmas sales to worry about when they reopen next week. Many fear a planned tax change related to Brexit could hurt business even more than Covid-19 lockdowns.
Retailers are calling on UK
Finance Minister Rishi Sunak to reverse a decision to abolish a perk for shoppers from China, the Middle East, the US and other areas outside the European Union. The system lets them reclaim the 20% value-added tax on purchases in the UK.
Sunak’s plan, which is expected to go into law as soon as Thursday and would take effect when the Brexit transition ends on Decemebr 31, would make Britain an outlier in Europe, according to the Association of
International Retail.
Rather than boosting government coffers as intended, businesses say, the move will encourage tourists to shop in Paris or Milan rather than coming to London for Burberry coats or Mulberry handbags — a change that would put jobs at risk and also hurt hotels, restaurants, theaters and other tourist sites already suffering from the pandemic.
Ewan Venters, chief executive officer of the London luxury food emporium Fortnum & Mason, calls the plan “suicidal.”
“Just as retail needs everything in its armory to help its recovery, it would appear this policy is completely out of sync with that,” he said.
Britain’s government is searching for ways to bolster finances as the pandemic pushes the economy into its worst crisis since World War II. It has defended ending the VAT refunds by saying they would be too costly to maintain post-Brexit. Under WTO rules, Britain can’t tax visitors from inside and outside the EU differently, according to the Treasury. So it either would have to extend the treatment to EU residents or abolish it.
Currently non-EU travellers can claim back the VAT on goods bought in Britain and taken out of the country within three months, minus administrative costs. The savings can be significant: For a 10,000-pound ($13,000) watch, it amounts to 2,000 pounds. Exceptions include goods purchased and used while in the UK, such as perfume. There are also no refunds for items such as unmounted gemstones.
Shoppers from overseas may spend a lot, but they are still price-conscious, said Albert Read, managing director of Conde Nast Britain, which publishes magazines like Vanity Fair and Vogue that feature luxury brands.