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The government plans to scrap VAT-free sales in airports
for items such as electronics, food and clothing for passengers
travelling outside the EU.
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A new briefing note shows that the change could cost UK
residents who fly to non-EU countries an extra £12.1 million
in tax each year.
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Changes also include stopping international visitors
benefiting from tax-free shopping on the UK’s high
streets.
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MPs have warned that this is the worst possible time
for such measures, given the impact on the
economy.
Analysis by the TaxPayers’ Alliance (TPA) reveals
that Brits could have to stump up an extra £12 million on airport
shopping each year as a result of a recent tax change.
Last month, HM Treasury quietly released plans
to scrap VAT-free sales in airports for items such as
electronics, food and clothing for passengers travelling outside
the EU.
The move is a kick in the teeth for sun
worshippers desperate for a well-earned break, especially after
being unable to fly overseas for much of this year due to
covid-19. The fall in demand this year has seen a notable impact
on the travel industry, with London Heathrow finding retail
revenues down 56 per cent during the first six months of
2020.
The controversial price hike is part of a wider
package of tax announcements which has been opposed by MPs. It
also includes stopping international visitors benefiting from
tax-free shopping on the UK’s high streets. This incentive has
helped to attract thousands of tourists to Britain each year and
created jobs across the country.
Together these measures could also have a
disastrous impact on the economy, particularly on sectors that
have struggled profoundly during the pandemic.
Key findings:
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The government announced in September 2020 that
from January 2021, duty free purchases will be extended to
British passengers travelling to EU countries.
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However, tax-free sales in airports of some goods –
such as electronics and clothing – will end for passengers
travelling to non-EU countries. Such a change could mean that
the UK is the only country in Europe not offering tax-free
shopping.
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If this change is implemented at the end of the
transition period, this could cost UK residents who fly to
non-EU countries an extra £12.1 million in tax each
year.
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According to York Aviation, the impact of the change
could also lower UK GDP by over £2 billion and lead to 19,400
job losses.
Duncan Simpson, research director of the TaxPayers’
Alliance, said:
“Some of these VAT changes will heap more misery on
embattled holidaymakers and a struggling sector.
“Hiking holiday prices at the same time as making the UK a
less competitive place for international shoppers could cost
thousands of jobs and damage growth, with the travel industry
already on its knees from the coronavirus crisis.
“Ministers must get their heads out of the clouds and pause
these changes before it’s too late.”
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Member of Parliament for The Cotswolds said:
“Alongside the wider economic impact of the VAT changes,
this move will hit British taxpayers in the pocket.
“Abolishing tax free sales on airport goods like
electronics, food and clothing will see a £12 million tax hike on
future holidays, with knock on impacts for the retailers and
airports who are already struggling. We need to encourage as many
visitors as possible from around the world to come to the UK to
help support tourism and related businesses in areas like the
Cotswolds and elsewhere.
“This is the worst possible time to be hiking taxes on the
Brits who may venture abroad next year, and makes the prospect of
recovery for the travel industry even more remote.
“But it would be one piece of really cheerful news in the
middle of the covid pandemic for UK travellers to Europe to be
able to have the prospect of duty free shopping."
