Heard on the Street: U.S. tourists can get a much better deal on a new Louis Vuitton handbag in Paris than in London. It's becoming a problem for the British capital.
The U.K. government scrapped tax-free shopping for overseas visitors at the end of 2020, arguing that the country could no longer afford to offer a perk its Treasury estimated cost the public purse £2 billion a year, worth $2.4 billion at current exchange rates. London is now the only major European shopping destination where tourists can’t get back the 20% value-added tax they pay on luxury purchases.
That means London is missing out on a spending boom by wealthy American and Middle Eastern tourists that began last summer and has benefited big cities on the European continent, mainly Paris and Milan. In January, VAT receipts from Middle Eastern visitors to continental Europe, a good proxy for luxury spending, were up 224% compared with the same month of 2019, based on data from tax refund company Global Blue.
American spending was even heavier, with receipts up 297% over the period. The strong dollar means the discount available on luxury goods in Europe has beenrecently and U.S. tourists outspent all other nationalities in every month of 2022. Data from Planet Intelligence also shows that Britons are spending heavily on tax-free goods in the European Union.
London’s luxury retailers are lobbying the U.K. government to reinstate VAT-free shopping for visitors. Big department stores like Harrods, owned by Qatar’s sovereign wealth fund, and Selfridges, which was sold for £4 billion in 2021 to Thai and Australian investors, relied heavily on tourist spending before the pandemic. The issue is more urgent since China
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