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Abolishing duty-free shopping hurts the British economy

The head of a global British supermarket chain has warned against abolishing tax-free shopping, the “tourist tax”, as it could cause major damage to the British economy.

Manju Malhotra, head of the prestigious global and British “Harvey Nichols” stores, said in a statement to the British newspaper “The Times” that the “tourist tax” created by the abolition of duty-free shopping in 2021. It has a significant impact on the British economy.

He said the tax affected not only retailers who benefit from international visitors, but the entire ecosystem of hospitality, hotels and cultural venues that are an integral part of the overall British economy.

For international companies, he said, this fuels investment decisions in the UK compared to other markets, adding that duty-free shopping is a necessary fuel for the UK economy and an important lever in providing an attractive destination for tourism and spending.

It comes after many companies criticized the decision to scrap the previous plan in 2021, which allowed international tourists to shop tax-free. Last month, a number of business leaders described the decision to scrap the plan as an unusually personal goal.

“International visitors are already changing their travel patterns, including reducing the total time spent in London, shifting spending to Europe and even removing the UK as a destination,” Malhotra said.

“We’ve also seen UK residents move to Europe to take advantage of the VAT rebate, particularly for higher-priced items,” he added.

Liz Truss previously tried to reintroduce the value-added tax exemption during her tenure as prime minister, but that decision was overturned by Jeremy Hunt late last year.

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A Treasury spokesman said: “VAT-free shopping does not directly benefit Britons as it allows overseas tourists who buy goods in the UK to claim VAT back when they return home.”