Following the United Kingdom’s decision to abolish the tax-free shopping incentive for tourists post-Brexit, cities like Paris and Milan have witnessed a surge in visitors who previously flocked to British stores for their tax-free shopping experiences. The absence of this benefit in the UK has redirected a significant number of international tourists to other European destinations where they can still take advantage of VAT rebates. An analysis indicates that out of the 162,000 non-EU tourists who claimed VAT refunds in Britain in 2019, approximately 20% are now seeking similar benefits in other EU countries. The policy change, which became effective in 2021 despite extensive lobbying from British retailers and tourism stakeholders, has had a discernible impact on tourist spending patterns. According to data from Global Blue, a Switzerland-based company specializing in tax rebates, approximately 34,000 tourists who previously shopped tax-free in the UK have not only shifted their shopping to cities such as Paris and Milan but have also increased their average spending from €2,900 per person in 2019 to €3,800 in 2023. This shift in shopping destinations has considerable implications for global travel and tourism, particularly affecting the high-end retail sectors in these cities. Andrew Keith, the CEO of Selfridges, has highlighted the negative impact on international sales in UK stores due to the absence of the tax-free scheme. Similarly, the New West End Company, a representative lobby for London’s major tourist areas, contends that the policy change has been more detrimental to the British tourism and retail sectors than the ongoing cost-of-living crisis. Despite these concerns, the UK government maintains that ending the tax incentive has been advantageous for the public finances and has not significantly deterred tourists. This stance is supported by findings from the Office for Budget Responsibility, which conducted reviews in 2020 and again in the current year, assessing the financial implications of the policy. As the UK approaches a national election, the debate over the tax-free shopping incentive continues. Michael Ward, Managing Director of Harrods, expressed skepticism at a recent World Retail Congress in Paris about any potential policy reversal under the current or future government. The opposition Labour party, expected to gain power, has not made reinstating the tax rebate a priority, indicating that the shift in shopping patterns may have lasting effects on the global travel and retail landscape.
Surge in Tourists in Paris and Milan as UK Abolishes Tax-Free Shopping
