Everyone walks by the seemingly endless rows of duty free shops in international airports, whether you purchase anything or not. I can never help but notice that in certain shops the prices of products often seem to be the same as, or even significantly more than in high street shops. But this surely can’t be true, as aren’t ‘duty free’ products VAT free? Well the answer to that question is yes, the businesses do not have to pay VAT on their products. So what’s the problem then?
The problem is that these companies sometimes tend to just increase the price of their products by 20% or more, pocketing what would’ve been VAT in profit. This is at a massive cost to the consumer, as you often think you’re getting a deal that’s 20% off, when in reality it’s far from it.
There is another problem too, which is to do with handing over your boarding pass when you buy something in duty free. Not all shops do it, but the likes of Dixons Travel and WHSmith for example, do. I’ve always wondered why they checked your boarding passes, as it’s not like you can sneak through security without one. If you are flying to a destination outside of the EU, the business does not need to pay VAT on that product. If you give them your boarding pass, then they can then prove that you are indeed flying outside of the EU and can claim back the VAT.
The strange thing is you are not obliged to hand over your boarding pass, and you are not breaking any rules or regulations if you refuse to. In this event the retailer would not be able to prove you were flying outside the EU, and would therefore have to pay the standard 20% VAT on that product instead of being able to claim a tax rebate. Some retailers still continue to decline sales if you refuse to show your boarding pass. Though, if you are purchasing alcohol or tobacco from the duty free shop then you are legally required to show your boarding pass by HMRC.
It’s always worth checking you’re not being ripped off in an airport store with a supposedly tax-free product, and you’ve got nothing to lose by checking how much they are on the high street through your phone. I’m not suggesting that you must now always refuse to show your boarding pass either, but maybe next time you should consider whether or not you should hand over your pass, to ensure that these companies cough up the taxes that they are responsible to pay.