Cheap iPhones in the junkyard as UK scraps VAT-free shopping scheme

Say goodbye to cheap UK iPhones.

Britain’s new chancellor, Jeremy Hunt, has abolished VAT-free shopping for foreign visitors to the UK since his appointment last week as part of an extraordinary turnaround in economic policy.

Mr Hunt on Monday announced a £32bn fundraising package to stem a weeks-long flight into UK gilts sparked by his predecessor Kwasi Kwarteng’s tax cut proposals and to restore confidence in the government’s fiscal sense.

One of the measures included was the suspension of the VAT-free shopping program, which would have reduced the price of expensive consumer goods by 20 percent for anyone bringing their purchases abroad.

But the scheme, along with a plethora of other tax breaks proposed by Mr Kwarteng, would also have punched a multi-billion pound hole in the UK budget. That scared bond investors into dumping UK government debt, which drove up borrowing costs dramatically.

Instead of picking up an iPhone Pro for just £879 on a sneaky shopping spree to London, Irish visitors to the UK now have to pay the same price as locals at £1099.

The proposed new VAT regime, designed to attract wealthy foreign buyers looking for luxury goods at bargain prices, never got off the ground as Mr Kwarteng’s ‘mini-budget’ of September 23 was unraveled in a matter of weeks.

The rapid erosion of Prime Minister Liz Truss’ credibility forced her to seek the resignation of Mr Kwarteng, replace him with Mr Hunt and begin rolling back his controversial policies.

Among the changes was the indefinite suspension of a plan to cut the base rate of income tax, which was due to fall in April next year according to Ms Truss’ original plans, which sparked the financial markets’ upheaval.

Mr Hunt also said the government’s huge energy price cap would only apply until April, after which the government would look at ways to help the most vulnerable households.

Other tax changes initially planned by Ms. Truss that will not go through were a dividend tax cut and alcohol tax rate freeze, as well as new rules for the self-employed.

“Together with the decision not to cut corporate tax and to restore the top rate of income tax, the measures I announced today will raise around £32billion each year,” said Hunt.

UK interest rates fell on the news, trading around 4 percent after rising as high as 4.5 percent last Wednesday as sterling strengthened.

(additional coverage, Reuters) Cheap iPhones in the junkyard as UK scraps VAT-free shopping scheme

Fry Electronics Team

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