Kurt Geiger, a luxury footwear and accessories retailer, plans 500 job cuts, affecting over a quarter of its workforce, early next year after the British government announced that it would abolish tax-free shopping on Dec. 31. The standard value-added tax (VAT) is 20 percent in the U.K.
In a letter to the British finance minister, Rishi Sunak, Kurt Geiger’s chief executive, Neil Clifford, described plans to terminate the VAT Retail Export Scheme as a “staggering own goal” and urged the minister to reconsider the decision.
He added that the country’s luxury goods manufacturing industry ”will be badly wounded and all global brands will halt any investment in the U.K. due to dramatic drop in demand.”
Clifford also noted that with the second wave of the Covid-19 pandemic and the introduction of new restrictions “it is becoming ever-clearer that British business is going to be living with the consequences of the pandemic for not months but for years to come.”
Clifford stressed that “businesses like Kurt Geiger rely heavily on the tax-free shopping scheme.” He added that high-spending travelers fly in from places such as China, the U.S. and the Middle East to shop in the U.K. “But if we suddenly start charging 20 percent more than other countries for the same goods, international visitors will immediately go elsewhere, taking their vital spending with them,” he added.
The manager advocated extending the scheme rather than dropping it. He pointed out that 70 percent of all international visitors to the country are from the European Union, but they are not eligible for VAT rebates because the U.K. is currently part of a customs union with the EU. But, when the Brexit transition period ends, also on Dec. 31, the country will quit the customs union. If it leaves without a trade agreement with the EU and applies World Trade Organization rules it “must treat all international visitors the same,” Clifford said.
In September, the Association of International Retail (AIR) warned that ending tax-free shopping could put 70,000 retail jobs at risk. If the decision is maintained, the U.K. will be the only country in Europe not to offer tax-free shopping to international visitors. Some 62 percent of respondents to a poll carried out by AIR would no longer visit the U.K. and 93 percent would stop buying in the country if tax-free shopping were abolished. The panel comprised over 4,800 non-EU international travelers from the U.S., the Middle East and the Far East.