EUROPE. The European Travel Retail Confederation (ETRC) has hit out at UK government proposals to withdraw tax free sales for outbound passengers from 1 January 2021. As reported, on Friday the UK Exchequer Secretary to the Treasury, Kemi Badenoch MP, released a Written Ministerial Statement announcing the rules that will apply to cross-border purchases at the end of the Brexit transition period.

As reported (and as expected), travellers departing the UK for EU countries will be able to purchase duty free goods from 1 January 2021. But in a bombshell addition to the legislation, tax free sales will be withdrawn for all outbound passengers on a range of categories, expected to include beauty, fashion and electronics.

Nigel Keal: “If adopted, this proposal would dismantle the framework upon which our industry operates, and eventually threaten the viability of the entire aviation ecosystem”

ETRC President Nigel Keal said: “The proposal from the United Kingdom to remove VAT relief from sales to international passengers leaving the UK poses a threat to us all. VAT free sales are a cornerstone of the duty and tax free industry. If adopted, this proposal would dismantle the framework upon which our industry operates, and eventually threaten the viability of the entire aviation ecosystem.

“While we do welcome the return of duty and tax free on excisable products, the majority of products we sell are not excisable, and through the relief provided on VAT for those sales, we have seen the establishment of a global industry. Removing this essential building block could cause irreparable harm to our industry, especially if replicated in other countries.”

He added that categories such as perfumes & cosmetics, electronics, confectionery, souvenirs and high-end luxury goods would “immediately suffer” should the proposal enter into force.

“ETRC will be working closely with the industry in the UK to respond to this threat and impress upon the UK government the potential consequences of this policy. The primary lobbying campaign in the UK will be led by the UK Travel Retail Forum (UKTRF). We therefore urge the industry to get behind the UKTRF and to make their voice heard with the British government.”

The return of duty free liquor & tobacco to outbound travellers to the EU is a welcome move, but the loss of VAT relief on other categories is a potentially huge blow (World Duty Free at Heathrow T2 pictured)

Key talking points about the new legislation

  • What does this spell for the future of non-duty free categories in English, Scottish and Welsh airports. How will airports, retailers and brands react?
  • If  such items can no longer be sold tax free, what are the contractual repercussions for incumbent and future retail operations?
  • Does this accelerate (as logically it should) the case for UK arrivals duty free shops?
  • Overseas retailers selling to UK-bound travellers (including returning Brits, notoriously high purchasers of liquor & tobacco) can now benefit from a sharply boosted allowance. Get those multi-packs ready…
  • What does all this mean for Northern Ireland?
  • What does it say about the British government’s appreciation (or complete lack) of the immense distress being experienced by UK airports and travel retailers?
  • What harm will the VAT-registration changes do to UK domestic retailers selling to international travellers?
  • What can be done about it (the UKTRF insist the battle to turn these plans around has just begun and can be won)?
  • The Moodie Davitt Report is organising an urgent session at the forthcoming Virtual Travel Retail Expo in October to debate the subject and rally support behind the UKTRF.

Source: The Moodie Davitt Report

UKTRF Chair Francois Bourienne told The Moodie Davitt Report on Saturday: “We have not seen any draft legislation yet and are engaging with government at the most senior level to make our position clear.

“The anger within the UK industry is palpable. This short-sighted proposal was announced without any discussion with industry, no impact assessment, and no warning. It places UK airports and retailers at a massive disadvantage and will simply send millions in retail revenue to airports in Europe and further afield.

“If all tax free sales are to be ended (other than liquor & tobacco), it will have a substantial and immediate impact on UK airports. Hundreds of millions will be lost in sales, & thousands of jobs are at risk – at a time when the industry is already on its knees. This could be the final nail in the coffin of several UK regional airports.

“The UK government tells us they are working on a strategy to restart UK aviation. This outrageous move completely undermines any support package they claim to be developing.

“Also by ending the VAT-RES scheme in the UK, the government will simply be sending many thousands of high-spending Chinese and other tourists to France, Italy and elsewhere in Europe.

“Every effort will be made by UKTRF and all the UK airports to reverse this decision in the coming weeks. Aside from government engagement at the highest possible level, a legal challenge is also being investigated.”

The The Airport Operators Association (AOA) also slammed the British government’s decision.

AOA Chief Executive Karen Dee said: “The Government have once again shown a complete lack of awareness for the jobs and businesses on the line in the aviation sector. Our industry is weathering the worst crisis in the history of civil aviation, it can scarcely afford another hammer blow like this.

“By removing the airside statutory concession, the Government is needlessly harming the revenue of retailers and airports. Passengers will be disincentivised from making purchases as they travel through the UK.

“Many foreign visitors will now choose to go elsewhere, attracted by the beneficial tax and excise regimes of our European competitors.

“I strongly urge the Government to reconsider, review its proposal and act in partnership with its once world-beating aviation industry to secure jobs, businesses and livelihoods across the country.”

*Click here for background and our coverage from the weekend of this unfolding story.