The decision to end duty-free shopping on goods such as perfume, clothing and electronics will lead to 138,000 job losses and cost the economy £3.5billion, according to a report.
Chancellor Rishi Sunak is ending VAT refunds for international visitors to shops, and restricting tax savings on goods bought by outbound holidaymakers and business travellers to alcohol and tobacco from January 1.
But business has reacted angrily, saying the tax is being levied just as the pandemic ravages the High Street and the travel sector.
The boss of Bicester Village in Oxfordshire (pictured) wrote to Rishi Sunak and MPs telling them the changes will make Britain ‘the least competitive shopping destination in Europe’
Bosses claim the UK will be the only country in the developed world not to offer tax-free shopping to travellers.
The boss of Bicester Village shopping centre in Oxfordshire has written to Sunak and MPs telling them the changes will make Britain ‘the least competitive shopping destination in Europe’.
This follows an outcry from Boots, Dixons, Heathrow, Marks & Spencer and 600 West End businesses last month.
Campaigners point to economic analysis by CEBR, which put the cost to the Treasury at £3.5billion as tourists ditch the UK and shop in Europe instead. The Treasury claims ending the tax incentive will save £1billion.
City centres such as Edinburgh, Manchester and Liverpool, which receive billions in tourist revenue every year, are already reeling from a collapse in air travel and the Government’s work from home advice.
James Lambert, deputy chairman of Bicester Village owner Value Retail, said: ‘The Treasury risks squandering a post-Brexit competitive advantage for the UK over the rest of Europe.
‘We will be handing our competitors a free gift, encouraging them to spend their money in other European countries.’
Businesses are considering taking court action, in the form of a Judicial Review.
Heathrow Airport said the decision could cost tens of thousands of jobs in an already-crippled aviation industry.
Sales of luxury products including perfumes, clothing and electronics can account for as much as 75 per cent of total sales in airports.
A poll of 3,000 tourists by Global Blue, a tax refund company, suggested as many as three in five high-spending visitors from the Middle East, China and the Far East will no longer visit the UK as a result of the changes.
The Treasury said the decision was taken ‘following concerns that the tax-concession is not always passed on to consumers in airports’, while the in-shop VAT refund scheme was ‘costly’.