Earlier this month The Independent newspaper reported that treasury ministers had demanded an end to rip-off VAT charges by some airport stores. The Financial Secretary to the Treasury told The Independent he was concerned and disappointed that some of Britain’s top retailers were pocketing millions of pounds in VAT discounts without passing the savings to customers.
Passengers’ boarding passes were required to be shown in some cases, and the information was used by stores to avoid paying 20 per cent VAT on everything they sold to customers who were travelling outside the European Union. Most of these stores did not pass on the savings to passengers.
The Treasury Secretary said the intention behind VAT relief at airports was to help passengers and not to line the pockets of retailers – and called for the practice to stop. “The VAT relief at airports is intended to reduce prices for travellers not as a windfall gain for shops,” he said.
Many passengers claimed to have been misled by airport shop staff who told them presenting a boarding card was obligatory – and even required for security purposes.
A traveller was quoted in the article as saying "I tried to buy some sun cream from World Duty Free and they refused to sell it to me without a boarding card.”
Tax savings not passed to customers
The report claimed also that other tax savings were not being passed on to customers, and that some airport shops were making profits of up to 100 per cent on each alcohol sale they made to travellers leaving Europe.
For every one-litre bottle of spirits sold, the airport stores saved around £11.06 in alcohol-specific duty charges as well as avoiding paying VAT. For each bottle of wine sold they saved £2.73 per litre and £3.50 on champagne.
But little of these savings were passed on to customers, the article said. World Duty Free, which had concessions at Heathrow, for example, charged customers £16.49 for a bottle of Absolut Vodka compared to a high-street price of around £20 – a saving of less than 20%.
Most high-street retailers operated on profit margins of around 25%, meaning that World Duty Free was making a profit even on the alcohol it sold to EU travelers. For non-EU travelers the store could be making as much as £9 in profit on each bottle sold at £16.49.
A spokeswoman for World Duty Free confirmed that it was a requirement that passengers who purchase any goods from the store produce “a valid transport document”.
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