British Chancellor of the Exchequer George Osborne on Thursday announced a review of how retailers at major airports in Britain collect sales tax from their customers.
The investigation, which is expected to be completed by early this year, comes after several retailers were accused of not passing along savings to consumers who bought items at major hubs including Heathrow Airport near London.
Regardless of their nationalities, passengers at British airports who are flying to destinations outside the EU are exempt from paying valued-added tax (VAT), which can reach 20 percent. The measure applies not only to duty-free stores, but also to retailers as varied as Boots UK Ltd, WHSmith PLC or Dixons Retail PLC.
However, some retailers at the country’s largest airports were found by the government to have been charging the additional tax in cases they were not allowed to, and keeping it rather than passing it on to tax authorities.
As a result, some travelers have refused to provide their boarding passes at cash registers. Airport retailers use boarding passes to determine whether customers are required to pay the sales tax, and the stores cannot claim rebates without that information.
The new investigation is to look at how retailers collect the sales tax from consumers traveling in the 28-member bloc and further afield. It was unclear whether the inquiry would result in fines for retailers or refunds for shoppers.
“VAT relief at airports is intended to cut prices for those travelers, not be a windfall gain for shops,” Osborne said in a statement on Thursday, adding that some retailers had been keeping half of every pound (US$1.47) of potential tax savings owed to individuals.
“Many people could be paying over the odds for their purchases, because the government’s VAT concession isn’t passed on,” he added.
This is not the first time that the British government has warned retailers about how they collect taxes from shoppers at airports. In August last year, the British Treasury scolded retailers at British airports, saying they should reduce prices for customers who are not required to pay value-added tax.
“While many retailers do pass this saving on to customers, it is disappointing that some are choosing not to,” Treasury official David Gauke said in August. “We urge all airside retailers to use this relief for the benefit of their customers.”
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