Manju Malhotra, the CEO of Harvey Nichols, has cautioned that the UK will miss out on more business in the absence of tax-free shopping, as international shoppers develop a preference for purchasing their luxury goods in Paris and Milan rather than London.
Being the latest top executive from the luxury retail sector to make this plea, Malhotra urged the UK government in an interview with The Telegraph to prioritize the reintroduction of tax-free shopping for foreign visitors, a perk that was discontinued post-Brexit.
She stressed the need for the government to address this issue ahead of the upcoming election, possibly scheduled as early as May next year.
Expressing concerns about the decline in both duration and expenditure by tourists in the UK, Malhotra mentioned, “There is talk of a change being considered as part of a review of tax policy but the timing is not clear.”
She further emphasized, “We don’t want to lose another summer.”
The recent call comes after statistics from tax refund entity Global Blue revealed that spending by international tourists in France has rebounded to levels prior to the pandemic, while in the UK, it is currently at only 64% of the previous levels.
Meanwhile, UK shoppers are leveraging the tax-free shopping regulations in the EU to increase their spending on luxury goods, which saw a surge of 200% last year in comparison to the levels recorded in 2021.
Malhotra praised France for its astuteness in facilitating VAT reclamation for foreign shoppers in Paris, which includes the installation of booths at Gare du Nord station within the Eurostar departure lounge.
Despite the urging, the Treasury has turned down requests for changes to the “tourist tax”, citing concerns that its reintroduction could cost UK taxpayers approximately £1.4 billion annually, potentially necessitating higher taxes at a time when tough decisions have already been made to reduce debt.
The policy is expected to be discussed by MPs at Westminster Hall on 7 September.
Malhotra concurred with the recommendations proposed by Burberry, suggesting that the government could explore alternative measures such as providing international shoppers with vouchers as compensation for not receiving VAT refunds.
She stressed that any potential tax-free equivalent “needs to be practical” and easily accessible, stating, “Because if it isn’t, well then customers just won’t use it.”