Duty free in general isn’t exactly a deal, whether on a plane or at an airport. The reality is that airlines and airport retailers have a captive audience when on a plane/at an airport, and they’re not afraid to take advantage of it.
If you have nothing better to do than browse their selection, they’ll do everything they can to convince you you’re getting a deal on account of not paying taxes. And most people will gladly fall for it, since shopping passes time.
In the US the process is still pretty simple. In duty free stores prices are shown to be tax free. If you’re not traveling internationally, you can still purchase things from those stores, but they’ll add on sales tax. As they should.
But in the UK the system seem to be the opposite, and it’s the retailers which have been profiting off of tax savings.
Specifically, UK airport retailers charge taxes on purchases. Then they request to scan your boarding pass when you make the purchase. Their dirty little secret is that they’re collecting boarding pass data so that they can pocket the 20% VAT (value added tax) for those travelers going outside the UK, without passing on the savings to the customers.
Via Telegraph Travel:
Airport retailers have been accused of misleading travellers by claiming millions in VAT refunds without passing on the savings to passengers.
The vast majority of airport shops in the UK request that passengers hand over their boarding passes to be scanned at the checkout – a practice that few realise is used to help stores claim back VAT of 20 per cent on goods sold to passengers flying outside the EU.
And research by the Independent has revealed that – while retailers suggest goods are tax free – these savings are often not passed on to customers.
Retailers are in most cases charging the same at airports as they are on streets, except they’re pocketing the 20% VAT on a large portion of those purchases:
Other retailers were found to be offering small reductions in their airport outlets, but still keeping the lion’s share of the savings. Dixons charges £619 for an iPhone 6 on the high street. In airport stores, it’s slightly cheaper, at £593.99 – but that’s nowhere near the £123.80 saving Dixons makes on every iPhone 6 sold to non-EU passengers. One item on sale at World Duty Free (Clarins Double Serum, 30ml) was priced at £45.80, despite being available for less on the high street, and despite the retailer saving £9.16 in VAT to many fliers.
Retailers admit to this practice, in the name of “accurate reporting of VAT.” And they’re not bashful about not passing on the savings, because it would be a “practical impossibility” to offer discounted pricing to those passengers traveling outside Europe:
Dixons said it follows the “standard practice of non-duty free airport retailers in offering one single, great value price across products”.
It added: “We are not duty free; instead, we offer customers a simple, single price and give them our price promise to beat key online competitors.”
WHSmith claimed that dual pricing – showing 20 per cent discounts for non-EU passengers – was a “practical impossibility”.
Ultimately I suppose retailers are within their rights to do that. And it’s not unreasonable to charge more at an airport than “on the streets,” given that retail space is much more expensive there, and staff are probably paid more as well.
But they’re certainly going about it in a sneaky way, and to suggest that it would be a “practical impossibility” to give non-Europe travelers a 20% discount is absurd.
Next time I buy something in a UK airport shop I won’t be showing my boarding pass on principle, though. On the other hand it sort of kills me that I’ll just be contributing more money to the UK government, which already taxes travelers more than anywhere else in the world!
Do you think this practice by retailers is legitimate? Will you refuse to show your boarding pass going forward, on principle?
(Tip of the hat to Mike)