VAT Man: airports should hand back the discounts

Simon Calder: the man who pays his way

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The Independent Travel

Sunscreen, salad and vanishing VAT

You’re flying to Florida, Thailand or one of those anomalous archipelagos loosely attached to a European nation, such as the Channel Islands or the Canaries: congratulations, you can enjoy tax-free shopping. Or can you?

You may have been following The Independent’s campaign to persuade airport retailers to refund VAT on sales to passengers who are flying outside the European Union.

For any journey within the EU, duty- and tax-free bargains ended in the summer of ’99. But passengers travelling beyond Europe can buy without a bean going to the Treasury. The biggest savings are on “classic” duty-free goods, i.e. hard liquor and cigarettes, where you must present a boarding pass to prove your entitlement. For most stuff, such as a 200ml bottle of Soltan sunscreen, the only tax element is VAT.


That sunscreen costs £6 at your nearest branch of Boots. The Chancellor extracts £1 from that transaction in the shape of VAT.

Once you go airside (that is, through the security check), that same bottle sells at Boots for the same price. Suppose you buy one, perhaps because you failed to notice that the original breached the security limit and was confiscated. If you happen to be flying to Greece, the retailer must pay a pound to the Government. But if you’re flying to Turkey –and Boots can prove it by checking your boarding pass – the retailer need not pay. Boots charges you the same, but perfectly legally hangs on to that £1.

I reckon that the traveller, not the retailer, should get the tax-free benefit. Don’t you?

duty free.jpg
Two passengers discuss which spirits to buy at a duty free store

Over the past 20 years, low-cost airlines – starting with easyJet – have aligned price with passenger choice. If all you want is basic transportation from A to B, you pay the lowest fare; choose to reserve a seat or check in a bag, and the cost rises. Conversely, if you decide to travel outside the EU, you should enjoy the tax privilege that goes with that choice.

Another airport retailer, WH Smith, argued that it would be impossible to have a dual-pricing system that depends on a passenger’s destination. Perhaps its bosses should visit Pret A Manger on the high street. A posh salad costs £6 if you choose to “dine in” at Pret, but if you take it away then in the eyes of the Chancellor it becomes VAT-free food rather than a taxable experience, and you save £1. In an airport context, over the course of a year those odd pounds amount to tens of millions.

Passengers arrive at Gatwick Airport

Until now, retailers have relied upon the docility of the travelling public. We are inclined to be compliant at airports because we are accustomed to the idea that multiple officials will demand to see everything from our passports to the soles of our shoes. So if a member of shop staff asks to see a boarding pass, many people simply acquiesce. The motive for the demand is a possible financial gain for the retailer, but not the passenger. Agreed, airports are stressful enough without risking an undignified confrontation. But if enough passengers politely decline to reveal their destination, retailers may back down and offer travellers the VAT exemption instead of keeping it to themselves.

‘I demand a refund’

Jonathan Frost tweets: “Airports should be giving their customers refunds for all the previous overcharging – just like PPI.” I disagree. The PPI scandal centred on the aggressive sale of inadequate and overpriced insurance. Shops at airports simply offer goods at a particular price and invite passengers to buy them. The boarding-pass lottery whereby some buyers prove more profitable than others is regrettable, but not a multi-billion-pound rip-off.

World Duty Free at Heathrow Terminal 2

Meanwhile, Tony Williams is airside and hungry. He wonders: “If I’m in an airport and travelling outside the EU, should I be charged VAT on my meal?”

Whatever your destination, Her Majesty’s Revenue and Customs wants a slice of your pre-flight pizza. “VAT will be due on all airside catering services,” says a spokesperson. “It would not matter where the customer was flying.” At least you won’t be asked for your boarding pass.

Spat out of the bag

“Dwell time” at airports spells a shopping opportunity, tax-free or not, that many travellers appreciate. But their spending ambitions may be constrained by their airline’s cabin-baggage policy. Relax, says northern England’s leading airport:  “Recent changes to the shopping-bag allowance at Manchester Airport mean that you can enjoy even more from the exciting range of duty-free retailers on offer. In addition to your hand luggage, you can now take ONE standard sized shopping bag on ANY flight.”

Boots has a presence in every terminal at Heathrow

Which came as news to British Airways. BA’s passengers can take one 63-litre case, plus a smaller 18-litre bag, into the aircraft cabin. It is Europe’s most generous economy-class allowance. But there are limits. The claim that Manchester-Heathrow passengers can bring an extra shopping bag was greeted frostily by BA: “If customers chose to buy goods in the tax-free shops at Manchester Airport then they should be able to fit it into their cabin bag,” I was told.

The airport says: “As always any passengers who are unsure about what they can take on board should check directly with their airline.”