Kiki McDonough responds to the tourist tax impact with a price cut.
- American and Australian tourists benefit from a 20% discount.
- The reduction aims to recover losses after VAT-free shopping ended.
- Luxury shopping’s role in tourism and its ripple effect are highlighted.
- The government is urged to reconsider VAT policies for economic growth.
Kiki McDonough, a renowned royal jeweller, has taken decisive action against the adverse effects of the ‘tourist tax’ by offering American and Australian customers a 20% reduction in prices. This strategic move is an attempt to counterbalance the significant ramifications prompted by the abolition of VAT-free shopping for tourists—a policy shift initiated by the then-Chancellor Rishi Sunak in 2020.
McDonough’s decision has been notably influenced by a stark decrease in American tourists visiting her boutique located in London’s exclusive Sloane Square. Americans represent her second-largest customer segment, making their absence keenly felt. The price cut not only aims to lure these international shoppers back but has already shown positive results. ‘It’s amazing how many people were then brought back [with the discount],’ she reflected on the outcome of her initiative.
The absence of VAT-free shopping has led to a redistribution of tourist spending, with countries such as France and Spain becoming more attractive destinations for luxury shopping. In contrast, the UK has experienced a decline in tourist-related expenses, affecting businesses reliant on international clientele.
McDonough argues that luxury shopping serves as a vital attraction for tourists, benefiting multiple sectors including hospitality and tourism. She asserts, ‘Luxury is not seen as important in this country,’ yet emphasises its substantial contribution to the economy through secondary spending in related industries.
While official estimates from the Office for Budget Responsibility suggest that ending tax-free shopping could save £540 million over two years, McDonough believes that reinstating the exemption could foster economic growth. She urges the Labour party to consider this broader financial impact, highlighting that the issue extends beyond luxury goods to the overall tourist experience.
Additionally, McDonough, who has been a cornerstone of the luxury jewellery market since launching her business in the 1980s, voices concerns over governmental focus on predominantly large corporations. She calls for a reduction in bureaucratic hurdles and advocates for enhanced support for small businesses and emerging entrepreneurs, encouraging a more favourable environment for business innovation.
A Treasury spokesperson acknowledged the challenges the government faces in the approaching budget, with efforts aimed at addressing a £22 billion deficit left by prior administrations. This fiscal pressure necessitates stringent decision-making regarding policies like VAT exemptions.
The broader implications of the tourist tax on the UK’s luxury market and economy continue to prompt calls for policy reassessment.
