Harrods boss fears ‘tourist tax’ U-turn will lead to exodus of wealthy shoppers

THE boss of Britain’s biggest department store, Harrods, has warned that London is losing wealthy customers to rival Paris because of a ‘tourist tax’.

Michael Ward said Chancellor Jeremy Hunt’s decision to scrap VAT-free shopping for international visitors puts London at a serious disadvantage.

The tax break previously allowed shoppers from overseas to claim the 20 per cent tax back on purchases. Destinations in mainland Europe – including Paris, Milan and Madrid, which compete with London to attract travellers – offer the incentive to foreign shoppers, as well as to visitors from Britain since it left the EU.

Mr Hunt claims his decision will save the Treasury £2billion a year. But Mr Ward said the wider implications of discouraging high-spending tourists from visiting and staying in London have not been grasped.

‘There is very clear, factual evidence to show Paris has done disproportionately well as a consequence of this,’ he said last night. ‘It’s not just the tax-free goods they buy. It’s the extra nights in a hotel, it’s the money they spend around Paris, the meals they’ve bought. It’s the spill-over effect of the visit.’

He wants the Government’s official spending watchdog to investigate the impact of the tax and its wider consequences.

‘It would be really good if the Government stood back and said, “Let’s have the Office for Budget Responsibility look at this.” To say, “We’ve got these statistics, could we ask for a fair assessment of what the impact of tax-free shopping is for UK plc.” I think it would be fair to do so at a time when everybody is going through real difficulties.’

Tourists visiting Britain were allowed to reclaim VAT until January 2021, when the tax break was axed by then Chancellor Rishi Sunak. Kwasi Kwarteng tried to reintroduce the incentive in his disastrous ‘mini-Budget’, but Mr Hunt reversed the plan a month later.

Every country in Europe charges VAT at between 17 and 27 per cent, but tourists can usually claim this back on items for their own use.

Arriving on the Eurostar at London’s St Pancras Station yesterday, one American tourist, Alison, 34, said she had bought two purses from luxury goods store Faure Le Page in Paris for £2,000 because she didn’t want to pay VAT.

Another couple, who asked to remain anonymous, bought two pairs of custom-made shoes from Loro Piana for a similar amount in

France, having made a day trip specifically to get the cash rebate. And Karen Uresti, 29, from Texas, spent £1,600 on a Louis Vuitton handbag while on a birthday trip to Paris.

Mr Ward’s comments join a growing chorus from business leaders and politicians.

Andrew Keith, managing director of Selfridges, said: ‘It is imperative the Government revisit this decision. Tax-free shopping is a clear growth driver for the UK and more specifically the wider tourist industry. Instead, we are watching international and British tourists visiting and spending in Paris or Milan.’

Thierry Andretta, chief executive of luxury leather brand Mulberry, said the drop in wealthy American and Middle Eastern tourists could force the brand to close its flagship store on London’s Bond Street.

Calling on the Government to reintroduce tax-free shopping, he said: ‘Some wealthy people now prefer to go shopping in Paris or Milan… it’s really hitting us. The wealthy are still buying but they’re not choosing to buy in London.’

Mr Ward explained that the dearth of overseas visitors is also affecting luxury British manufacturers, saying: ‘If a visitor comes to Britain, they tend to buy British. When they go to Paris, they buy French.

‘The people that lose out of this are [those who make] the beautiful Mulberrys… the people in Castleford who make the trench coats for Burberry.’

Fraser Brown, retail director at Heathrow Airport, said Mr Hunt’s decision was a ‘bitter disappointment at a time where the country needs all the growth it can get as we recover from the most difficult period in our history’.

Boqing Surdol, who runs the VAT refund desk at luxury department store La Samaritaine in Paris, said: ‘There has certainly been a very large increase in the number of British people taking advantage of this [the tax refund].

‘Even if people coming from Britain have to pay a bit more for their travel, the VAT savings still make the trip worthwhile.’

‘It’s not just the goods, it’s the hotels and meals too’