Art dealers have joined the luxury goods and watch industry in denouncing the UK government’s “hammer blow” plans to end tax-free shopping for tourists from January 1st.
British Antique Dealers’ Association General Secretary Mark Dodgson warns that dealers specializing in wearable items such as jewelry, silver and small pictures will be particularly hard hit by the introduction of the new rules at the end of the Brexit period. This will prevent visitors from outside the EU from being able to claim VAT refunds on items purchased in the UK and taken home. “Smaller businesses will definitely suffer,” added Dodgson.
British firms had hoped that the program would be expanded to include EU visitors next year to attract high spending to the UK. Instead, the Treasury Department announced the withdrawal of the existing system for all visitors.
Chancellor Rishi Sunak claims the UK would get back £ 528 million in taxes, but if tourists stay away the UK economy loses £ 6 billion a year, of which £ 4.5 billion comes from luxury sector sales, according to economic analyst Global Blue . In London alone, job losses could rise to 60,000.
Rohit Gupta, the finance director of the high-end jeweler Moussaieff, who exhibits at the London art fair Masterpiece every year, describes the move as “very harmful” for Bond Street. “Why would someone come here and pay 20% and not go to France and have the option to export it and not pay VAT, or go to Switzerland and pay 8% VAT?” he says. “The impact will be enormous.”
Many fear that Chinese, Middle Eastern and Russian buyers will shop in Paris, Madrid, Milan and Dublin instead. Indeed, within days of Sunak’s announcement of the plans in September, French President Emmanuel Macron said visitors should come to France instead, cutting the value of VAT reclaimable goods from 175 euros to 150 euros.
However, London retailer Omer Tiroche, whose Conduit Street gallery is currently showing Hermès handbags alongside paintings by Andy Warhol, Piero Manzoni and Zao Wou-Ki, believes that this is unlikely to deter buyers from the Middle East and China will.
He says: “Although the law provides for full VAT relief, VAT reimbursement is actually done by private companies that use a large portion, so only 12% or 13% are actually reimbursed to the customer at the airport. This amount is unlikely to have any impact on luxury goods buyers, especially since they come here to see offers other than in their own countries. “
The UK Treasury notes that around 92% of UK visitors do not use the VAT export system and that tax-free shopping “is still available in-store when shipping to overseas addresses”.
Aside from the added cost of shipping items, art and luxury buyers often prefer to have their purchases hidden behind closed doors. As Gupta says, “In a country like Saudi Arabia, the royals play everything very close to their chests, they don’t want their business to be advertised. When we send objects to Saudi Arabia from here and they go through customs, everyone knows their business. “
Although some warn that the UK may see a decline in tourism in the midsummer months, Masterpiece Managing Director Lucie Kitchener doesn’t think the change in the law will directly affect the June Fair “because our visitors are coming to London for a while a number of cultural and other reasons, not just for shopping ”. In addition, she says, “the majority” of the works exhibited and sold at Masterpiece are paintings and furniture, and “are usually always shipped so they are generally not covered by the retail sales tax system”.
While London’s appeal as a cultural hub remains “really strong”, Kitchener admits that “this legislation may have a broader impact on business in Britain, especially the luxury sector”. She adds, “It also shows the impact a seemingly small change in legislation can have and I hope that in the future we can consider laws that aid rather than hinder UK businesses.”