Complex VAT refund hurts UK tourism

Updated: 2016-03-11 08:11

By Wang Mingjie(China Daily Europe)

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Complex VAT refund hurts UK tourism
Chinese tourists stand in a queue to get VAT refund at Heathrow Airport Terminal 3. [Photo by Wang Mingjie / China Daily]

Analysts and Chinese travelers complain of confusing fees, low exchange rates and long waiting times to get their money

Tourism experts and overseas visitors, including from China, have criticized the UK's tax-refund system for being too complex and time-consuming.

The system, in place since 1995, allows tourists from outside the European Union to claim back valued-added tax on any purchases made in the country upon departure. Yet critics argue that it threatens to hamper the United Kingdom's bid to become a major shopping destination.

"The poor VAT refund experience, as well as hidden fees, certainly decreases Chinese travelers' satisfaction about their UK travel and lowers the UK image as a destination," says Yang Jingjing, a lecturer on tourism development at the University of Surrey.

According to the rules, non-EU residents who buy goods in the UK can apply for a VAT refund when they leave the country. In theory, this involves filling out a form and presenting it with receipts to a refund booth, like those at the airport. In practice, however, the procedure can be time-consuming, proving an extra burden for passengers who already need to pass through lengthy security checks.

The complexities of the procedure, the number of companies that operate refund programs, and long lines at airport counters mean many tourists are either losing out or being charged what some say are exorbitant fees.

Chen Lizhi, a recent Chinese graduate of Loughborough University in the East Midlands, says she spent 4,000 pounds ($5,680; 5,170 euros) on luxury bags, clothes and skin care products during a London shopping trip, paying about 700 pounds in VAT.

"I ended up receiving a refund of just 368 pounds," she says. "I didn't expect there'd be an additional handling fee at the airport counter, as a big chunk had already been taken out at the time of the purchase. Also, the currency exchange rate at the refund desk is low compared with high-street rates.

"I may hesitate to shop again in London as the cost of getting a refund is too high."

Complex VAT refund hurts UK tourism

To qualify for a VAT refund, tourists have to spend a minimum amount, which varies from retailer to retailer. At the point of sale, foreign customers can ask for a refund form and the retailer and/or the VAT refund operator will charge a service fee. Rates vary depending on the sum and the operator.

The main refund operators are Global Blue, Premier Tax Free, Tax Free Worldwide and Innova Tax Free, while companies such as Travelex, Moneycorp and International Currency Exchange act as agents to process the refunds and handle currency exchanges.

"I'm very confused by the different rates charged by the retailer and the VAT refund operators," says Qian Sujia, a frequent visitor to the UK from Hangzhou. "As a tourist, I can't do much, but I'd appreciate it if someone could provide a clear table for what will be charged."

Global Blue says the company does not share "refund tables" in any of its markets due to commercial sensitivity, adding that its services are optional and can be declined if travelers prefer not to pay its service fee.

"They can liaise directly with merchants and local authorities; however, this process is a very lengthy and complex one," the company said in a statement.

Selfridges, a popular store among Chinese visitors to London, would not comment on fees for VAT refunds, saying only that its tax-free shopping service is operated by Global Blue.

Harrods, another famous British department store, also declined to comment on fees, but says it is continuing to work with Global Blue to improve the tax-free process by providing a selection of options for receiving tax refunds, including cash in store for sales under 10,000 pounds and instant refunds via Harrods Rewards Cards or Alipay, the third-party payment system owned by Chinese technology company Alibaba.

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