A review of airport shopping sales to ensure VAT savings are being passed on to customers has been announced by George Osborne.
Consumer advocates allege retailers such as Boots and WH Smith charge customers the VAT and then claim rebates from the Treasury. The shops get the evidence to support their claims by asking passengers to show their boarding passes every time they purchase something.
Allegations of the large-scale cheating by airport shops first hit the national headlines last August. A spokesperson for the Treasury said it looked like shops were netting up to 50 per cent profit on each sale that should by rights be given to consumers.
Chancellor George Osborne said VAT relief for travellers leaving the EU was designed to benefit them and not provide bonuses for retailers. He carried on by saying it was an unacceptable practice and was causing shoppers to pay more than they should be for products.
Retail chains with UK airport outlets claimed it would be time-consuming to introduce two-tier pricing specifically to accommodate passengers leaving the EU. The law as it stands does not force shops to give buyers VAT discounts. Any new regulations introduced will require a law change to ensure retailers toe the line.
Since being lambasted by consumer groups, retailers say they have changed their procedures. Boots says it scrapped the requirement for customers to show their boarding passes in August while WH Smith said it would follow whatever regulations were decided upon.