When they reopen next week, UK’s luxury stores will have more than Christmas sales to worry about. Many fear that a proposed Brexit-related tax reform could damage business even more than the lockdowns due to COVID-19.
Brexit is the withdrawal of the United Kingdom from the European Union and the European Atomic Energy Community.
Retailers are calling on Rishi Sunak, Finance Minister of the United Kingdom, to reconsider the decision to remove the incentives for shoppers from China, the Middle East, the United States and other areas outside the European Union. The system allows the shoppers to reclaim the value-added tax of 20 percent on purchases made in the UK.
According to the Association of International Retail, Mr. Sunak’s proposal which is planned to go into law soon and likely to take effect when the Brexit transition ends on December 31, will make Britain an outlier in Europe.
The move would encourage tourists to shop in Paris or Milan instead of coming to London for Burberry coats or Mulberry handbags, rather than raising government coffers as expected, businesses argue. This move could also put jobs at risk and also hurt hotels, restaurants, theaters and other tourist sites already suffering from the pandemic.
Ewan Venters, chief executive officer of the London luxury food emporium Fortnum & Mason, calls the plan suicidal. “Just as retail needs everything in its armory to help its recovery, it would appear this policy is completely out of sync with that,” he said.
The world’s sixth-biggest economy is now set to shrink by 11.3 percent in 2020, the most since “The Great Frost” of 1709, before recovering by less than half of that in 2021 according to the country’s finance minister, who is on a cost cutting spree. He has already announced cuts to foreign aid spending and a freeze on pay for many public sector workers.