Complex VAT refund hurts UK tourism

Updated: 2016-03-11 08:11

By Wang Mingjie(China Daily Europe)

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Customers are also charged a fee at the airport counter for cash refunds. And although there is no fee for credit or debit cards, overseas visitors have complained they find it hard to chase refunds that fail to make it to their account in time once they return to their native country.

"I had the experience of not receiving money from a card refund, and I couldn't do much about it when I returned to China," Qian says. "Plus, non-UK credit and debit cards will also impose their own exchange rates."

Lei Yamin, a Chinese tourist from Zhejiang province, adds, "I was appalled that those who want a refund in sterling are asked to take out every single item they have purchased to be checked, while those who want a foreign currency don't. That is a clear indication that a sterling refund is discouraged, as the currency conversion rate at the refund booth is much lower than on the high street."

In response, Travelex said in a statement that it is reviewing its practices at airports to shorten wait times, and added that it is legally required to conduct random checks on people's goods at VAT refund counters.

However, Hugo Jenney, a partner at British law firm Stephenson Harwood, says the lack of clarity in the system is ripe for criticism, as it allows various parties to potentially exploit the naivety and lack of bargaining power of the average foreign tourist to the UK.

"It's fair to have certain charges, but whether they are clearly outlined to the buyers so they know what they are doing and what their choices are, or whether they are exploiting a muddy area in which they know the tourists will not complain is another matter," he says.

He adds that he was shocked by one report that a Chinese visitor had lost about 50 percent of her VAT refund, arguing that various participants are "profiteering" from the complexities of the system.

Such inefficiency would not be tolerated in many other markets, he says, and the reason it is in the UK is because there is no transparency, and perhaps also a lack of competition or interest in competitiveness, he says. Jenney says the system would benefit from some scrutiny from a body that can impose guidelines.

Yang at Surrey University agrees, adding that a hotline or online service should be set up to make sure Chinese tourists can track refunds once they depart the UK. Handling complaints may also require cooperation from Her Majesty's Revenue and Customs and tourism organizations, she says.

The office of David Gauke, financial secretary to the British Treasury, declined to comment when contacted by China Daily. However, the HMRC responded with a statement saying: "We're working on creating a digital VAT refund scheme for overseas shoppers. This will provide shoppers and retailers with a quicker and easier way to take advantage of the refund scheme." It did not reveal a time frame for its implementation, however.

"Shopping is a huge part of many tourists' visits to Britain," says Patricia Yates, director of VisitBritain, the UK's official tourism board. "A simple and slick VAT refund scheme would make us a more attractive destination for high-spending visitors, including the Chinese, who are some of our highest spenders."

Latest figures from VisitBritain show Chinese made 214,000 visits between January and September last year, up 37 percent on the same period in 2014. Each spent on average 2,688 pounds.

Tourism has become big business in the UK, with the number of people employed in the industry growing by almost 12 percent in the five years up to 2014, from 2.66 million to 2.97 million, according to VisitBritain.

David Higgins, general manager of China Links Travel, warns that if inbound clients from China are not able to see financial benefits from the VAT refund system "and are met with additional paperwork, then it could affect their overall decision of where to tour, especially if the process is much smoother in other European countries such as France and Italy".

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