These well-heeled consumers are vital after Covid battering
BUSINESS leaders rarely fire fusillades at the Government. But if they fear their enterprise is imperilled, they don’t hang back. The bosses of Harrods and luxury leather group Mulberry have courageously gone on the offensive against Rishi Sunak and Jeremy Hunt for withdrawing tax-free shopping for overseas visitors to Britain.
The decision delivered a savage blow to upmarket shopping across Britain. Mulberry’s denunciation has been echoed more politely by bosses at Bicester Village in Oxfordshire, home of prestigious brands and a honeypot for tourists.
Instead of seizing the Brexit opportunity to remove onerous taxes and compete better with the luxury retail empires in Paris and Milan, our Government has inflicted immeasurable damage to the flow of well-heeled shoppers from the Middle East, Far East and US. Already, the world’s wealthiest consumers are diverting to other European centres.
As well as clobbering Middle Britain by freezing tax-free bands until 2028, Hunt’s Autumn Statement took a sledgehammer to entrepreneurship and this country’s reputation as a great place to shop and stay.
Mulberry revealed that the decision to revoke foreigners’ ability to reclaim 20 per cent VAT tax on purchases made here has led to a 45 to 50 per cent fall in the number of foreigners using its stores.
Other luxury brands such as Burberry, Fortnum & Mason and Harvey Nichols are also worried.
Some are advertising special ‘tax-free’ shopping (by absorbing the VAT cost themselves) to try to maintain foreign trade.
Independent forecasters Oxford Economics estimate that tax-free shopping would attract 1.6million more overseas visitors a year, adding to HM Treasury’s coffers with everything else they spend.
Britain is the only G7 nation to raise taxes at a time of an imminent recession and when interest rates are rising – undoubtedly a recipe for a deeper recession and stunting economic growth.
For its part, the Treasury claims restoring VAT on overseas shoppers’ purchases will collect an extra £2billion a year.
But this wilfully ignores warnings that their move will result in lost tax income if the profits of the luxury goods industry are depleted, the nation’s top hotels empty and fewer seats are sold in theatres and restaurants.
How different it is in France, where luxury-goods firm LVMH has been encouraged to become the most highly rated corporation in Europe.
Here, our Government is stunting opportunities for British firms to build on their creativity and flair to nurture global-leading brands. But visitors to Paris enjoy a tax break on purchases, with a VAT refund immediately available when they present receipts at departure desks at the airport, port or railway station.
The Tories are traditionally the party of enterprise, endeavour and aspiration. But now, increasingly disdainful of free-market capitalism, they are in danger of becoming no better than Labour, which never sees a tax it doesn’t like nor wastes an opportunity to wage a class war against strivers.
The truth is that encouraging foreign visitors to spend more money here would improve Britain’s balance of payments and boost confidence in sterling.
This is vital at a time when high streets and shopping centres have been battered by Covid and by surging energy bills, leaving even upscale London shopping areas such as Knightsbridge littered with empty premises to let.
Discouraging rich overseas visitors will only stoke the misery.