Cross-border shoppers will not get the same tax breaks as other UK visitors after Northern Ireland was excluded from the UK government’s new VAT-free shopping scheme.
Following a proposal by UK Chancellor Kwasi Karteng on Friday, non-British visitors to the UK can claim VAT refunds on goods they buy from shops, airports and other departure points – if they take them home in person with luggage.
However, with the scheme being limited to England, Scotland and Wales, consumers from the Republic of Ireland cannot simply slip across the border to get a 20 per cent discount on their purchase.
That means Irish visitors to London can get a new iPhone 14 for just £879.20, but the same device at the Apple Store Victoria Square in Belfast costs £1099. At the higher end of the price spectrum, a top-of-the-line Hublot men’s watch worth £83,000 will cost you a discount of £66,400 in the UK.
While the change to the UK VAT system aims to attract wealthy foreign shoppers looking for budget luxury goods, it leaves Northern Ireland retailers largely outside of the UK’s attempt to revitalize the UK economy, the mini-budget ‘Growth Plan 2022’.
Instead, under the Northern Ireland Protocol, Northern Ireland and the Republic of Ireland remain part of the same VAT regime, albeit at different rates with 20 per cent VAT in the north versus 23 per cent south of the border.
“This is a missed opportunity,” said Glyn Roberts, Managing Director of Retail NI, which represents independent retailers in Northern Ireland. “We were looking for a general VAT reduction that wasn’t there [the plan]. If it’s designed to help high street businesses, it’s a disappointment.”
Mr Kwarteng on Friday unleashed historic tax cuts and a huge increase in borrowing in an economic agenda that rocked financial markets with sterling and UK government bonds in free fall.
Kwarteng has scrapped the country’s top tax rate, scrapped a proposed corporate tax hike and, for the first time, put a price tag on Prime Minister Liz Truss’ spending plans to double Britain’s economic growth.
Investors divested short-dated UK government bonds as quickly as they could, with the cost of borrowing over 5 years seeing its biggest one-day rise since 1991, when the UK increased its FY2000 debt issuance plans by £72.4bn. The pound slipped below $1.11 for the first time in 37 years.
Kwarteng’s announcement marked a crucial shift in British economic policy, picking up on the doctrines of the Thatcher and Reaganomics eras of the 1980s, which critics have derided as a return to “trickle-down” economics.
“Our plan is to expand the supply side of the economy through tax stimulus and reforms,” Mr. Kwarteng said.
“This is how we will successfully compete with dynamic economies around the world. This is how we will turn the vicious circle of stagnation into a virtuoso cycle of growth.”
The Institute for Fiscal Studies said the tax cuts were the largest since the 1972 budget, which ended in disaster because of its inflationary impact.
The market backdrop could hardly be more hostile for Mr. Kwarteng as the pound has underperformed against the dollar almost every other major currency.
“In 25 years of budget analysis, this has to be the most dramatic, riskiest and unfounded mini-budget,” said Caroline Le Jeune, head of taxes at auditing firm Blick Rothenberg.
“Truss and her new administration are taking a big risk.”
(additional coverage, Reuters)
https://www.independent.ie/business/irish/irish-tourists-could-make-huge-savings-from-uk-vat-free-scheme-but-it-wont-include-cross-border-shoppers-42012684.html Irish tourists could make huge savings from the UK’s VAT-free system, but cross-border shoppers are not catered for