Airport retailers and the VAT question
LONDON, Aug 12th 2015 – Airport retailers in the UK generally subscribe to a single pricing policy, which means that all passengers receive the same price, irrespective of whether they are travelling in the EU or outside of the EU. Those passengers travelling outside of the EU genuinely receive the tax free price, whereas those travelling within the EU receive a ‘equivalent tax free price’ – i.e a discount of 20%. The cost of this is equally borne by the retailer and the landlord alike. The retailers which sit outside of this are Boots, WH Smith and Dixons as well as tobacco and Liquor as it is a duty issue rather than a VAT issue. Boots and WH Smith match their high street prices whilst Dixons price match with Amazon and John Lewis. Therefore most passengers, particularly those travelling within the EU, benefit significantly from the pricing policy as they receive a discount.
Victoria Gould, Director in JLL’s Retail team commented: “This policy is to obviously increase the level of sales at the airport. The issue regarding Boots and WH Smith and the fact that they do not offer a saving to the consumer, particularly those travelling outside of the UK, is a complex one. Of course it would be possible for them to operate a dual pricing policy but margins are typically quite low in these businesses and also they are seen as core offers within the airport that are a real benefit for the passenger. They pay a significant amount in terms of concession fee (rent) to the airport operator and if they were to offer dual pricing it would mean that concession fee levels would be lower to the airport, meaning that the airport may take the decision to replace them with an alternative retailer, thus taking away a core retail offer. It may also mean that all the other retailers would request a dual pricing policy which would drastically reduce the discounts available to those passengers travelling within the EU.
“The passenger is within their rights to refuse to show their boarding pass at the till for these retailers (you would have to show the boarding pass if purchasing liquor or tobacco due to the fact you can only buy certain products if travelling outside of the EU). The boarding pass scanning process also provides the retailer and the airport with very valuable information on the purchasing habits of certain passengers, thus enabling the retailer to ensure the most appropriate merchandise mix for specific flights.”