Rishi Sunak faces backlash from retail giants over plans to axe tax-free shopping

Rishi Sunak is facing a backlash from retail giants including Selfridges, Harrods and Marks & Spencer over ‘catastrophic’ plans to axe tax-free shopping for tourists.

Bosses warned the Chancellor it would deliver a £5.6 billion hammer blow to the economy, decimate high streets and wipe out 70,000 jobs.

Selfridges managing director Anne Pitcher said it was ‘another nail in the coffin’ for city centre firms reeling from lockdown and working hard to lure shoppers.

Rishi Sunak (pictured) is facing a backlash from retail giants including Selfridges, Harrods and Marks & Spencer over ‘catastrophic’ plans to axe tax-free shopping for tourists

She said the tax grab would drive international travellers to Paris and other European cities at a time when British firms needed them most.

Millions of wealthy tourists from China and the Middle East come to Britain to shop each year, spending £22 billion on hotels, restaurants and cultural attractions during their stay. 

Business chiefs are threatening legal action after the Treasury quietly announced that at the end of the year it would pull out of the VAT Retail Export Scheme, which lets overseas visitors reclaim the 20 per cent in VAT on items such as clothes, handbags and jewellery.

Most countries outside the EU extend the same perk to British travellers and businesses.

Harrods (pictured) are among the retail giants warning the Chancellor his plans would deliver a £5.6 billion hammer blow to the economy, decimate high streets and wipe out 70,000 jobs

Ms Pitcher blasted the ‘appalling’ move – which has left bosses ‘in shock’ and would hit tourism, retailers and other city centre firms – and demanded an immediate review.

She said organisations had recommended extending the scheme to European visitors after Britain leaves the EU on January 1 to help kick-start tourism after Covid-19.

Any additional tax revenue from the latest decision would be wiped out by a drop in visitors, she said.

‘This should have been a golden opportunity to make Britain one of the most desirable countries to visit. Instead, with a single swipe, the Government has taken more than £20 billion of opportunity from the economy. 

Selfridges managing director Anne Pitcher said it was ‘another nail in the coffin’ for city centre firms reeling from lockdown and working hard to lure shoppers, Pictured: File image of Selfridges

This isn’t just a problem, it’s a catastrophe,’ said Ms Pitcher. ‘People don’t just shop when they come. They stay in hotels, eat, travel throughout the UK. Those businesses will be severely impacted.’

Ewan Venters, chief executive of Fortnum & Mason, said he was ‘flabbergasted’, warning: ‘This is a significant blow to our recovery.’

In a letter to Mr Sunak, 20 firms in the Association of International Retail point out the huge volume of purchases by non-EU tourists at flagship shops props up ‘more marginal stores’, warning: ‘They will be the first to close and lose jobs.’

A Treasury spokesman said: ‘We’re making use of the end of the transition period to bring personal duty and tax systems in line with international norms. This was subject to consultation. 

VAT-free shopping is still available. Retailers are able to offer it to overseas visitors who purchase items in store and have them sent to their home addresses.’