Thousands more aviation jobs could be lost and airfares are likely to rise as a result of a decision by the British government to abolish Duty Free shopping for international travellers passing through the nation’s airports. Heathrow airport alone estimates that 2,000 workers could lose their jobs once the “disastrous tourist tax” is introduced on January 1, 2021.
The Treasury announced plans to stop the majority of Duty Free shopping for international travellers earlier this year, with the exception of tobacco and alcohol which will be extended to passengers who are travelling to EU countries. International passengers will also be able to take advantage of tax free shopping on other goods if they choose to have their shopping delivered direct to their home address.
But the boss of Heathrow Airport believes the decision will still result in around 2,000 job losses because sales at airside shops will plummet. Nationally, one trade group estimates that 19,000 jobs could be lost as a result of the decision.
“Recent announcements, such as the tourist tax, could be the final nail in the coffin for struggling businesses such restaurants, hotels and theatres that rely on inbound tourists, as well as for retailers,” explained Heathrow chief executive John Holland-Kaye.
“To make Global Britain a reality, the government should be helping the aviation sector to survive, to develop routes to our key trading partners, and attract businesses and tourists to come to Britain to spend their money,” he continued.
The loss of airside shopping could cost the British economy as much as £2.1 billion annually. Heathrow rakes in as much as £585 million per year on retail sales – around 20 per cent of its revenues.
Some travellers are unlikely to miss the shopping mall like experience that many airports have become but the shortfall in revenues is likely to be recouped in higher fees that airports charge airlines. Those fees will then likely be passed onto passengers in the form of higher airfares.
The aviation industry, already battered by the COVID-19 pandemic and now facing the uncertainty of a no-deal Brexit, believes this couldn’t come at a worse time. Passenger numbers were down 88 per cent at Heathrow in November and on Friday, the airport said it would keep Terminal 4 mothballed through to the end of 2021 based on current passenger forecasts.
The end of the VAT Retail Export Scheme also means that international visitors can’t buy goods in British shops and then obtain a tax refund at airports as they leave the country. The scheme was popular with high spending tourists who booked trips to the UK specifically to buy luxury goods at a knockdown price compared to what they would be expected to pay at home.
Wow this seems really dumb. The UK already has super high APD taxes. I could see getting rid of the tourist VAT refund programs but the duty free shopping at airports should stay in place. I’m not a big fan of it but there is no reason to pick this point in time to punish stores.
This article is factually incorrect and you clearly do not understand the difference between Duty-Free Sales and Tax-Free sales in The UK.
The UK has not abolished “duty-free” sales as you claim, it has actually extended the (Excise) Duty Free sales of Liquors and Tobaccos for all Territories now including all EU States from Jan 1st. What has been abolished is the VAT Tax Free Sales for all other products like Perfume, which were never and have never been Duty Free at all, because they do not carry Excise Duty. Likewise The UK Govt has abolished Tax-Refunds for Foreign Travellers, unless the Goods are shipped, rather than carried in Baggage. Not only that but this facility for Refunds has actually now been extended to all 250million+ EU Visitors as well. Check before you fly!
If this is such a good change, why is heathrow concerned more than 2,000 workers could be made redundant?
You clearly do not understand how the Duty Free/Tax Free or Travel Retail markets function, nor is it likely that more people will lose their jobs in LHR Retail than actually man these Stores at present. Firstly, there will be a massive increase in the sales of Alcohol & Tobaccos to all the travellers now going to The EU. This was not allowed before, until Jan 1st, 2020. Secondly all other products only include VAT at 20% (Tax-Free), not (Excise) Duty Free which is much higher. And, already there was only one “discounted” price for all these “Tax Free” (VAT only) Products regardless of where they travelled to. So the change only means that some Retailers will lose some of their windfall (VAT refunded) profits, but there will be a margin compensation on the massively increased “Duty Free Sales”. Already Germany has the same Tax-Free (VAT included) system for airport sales but we are yet to see or have seen any Frankfurt Stores showing mass redundancies or losses. You have misinterpreted the market scenarios.