Spain has an opportunity in Brexit to boost shopping tourism by up to 2,600 million euros due to the change in tax treatment that affects the United Kingdom and its citizens on their trips to the European Union.
With the departure of the United Kingdom from the European Union (EU), residents of the British Isles, including 160,000 Spaniards, will be able to buy tax free in EU countries, except in the Canary Islands where there is no tax free. Likewise, non-EU citizens who traveled to the United Kingdom and who could mobilize purchases from other countries by losing the tax benefit.
“The potential for Spain will depend on our ability to gain market share of the 1,100 million euros for British (including expatriates) and the 1,500 million euros corresponding to purchases from non-EU citizens who visited the United Kingdom and who will now transfer their purchases to another country “, explains Luis Llorca, CEO of Global Blue, the leading international tax free operator.
The volume that Spain will effectively capture is unknown. “It is difficult to evaluate in the context that we live in now and with still very little history, but the order of magnitude is in the hundreds, even billions,” emphasizes Llorca.
“There is a correlation between the VAT refund for purchases in stores and the positive impact on GDP”
The report Brexit and Spain as a shopping destination, prepared by Global Blue, reveals that six out of ten tourists from the United Kingdom are willing to spend 50% on purchases on their trips through Community soil.
An intention that places Spain as the main recipient country for English tourists to substantially increase the spending they generate. Before the pandemic, in 2019, more than 18 million Britons arrived in Spanish territory, of which 11 million did so in the Peninsula and the Balearic Islands, where the tax exemption-VAT refund- can already be applied.
Regarding the impact on the Spanish economy, Llorca points out that “there is a correlation between the VAT refund for purchases in shops and the positive impact on GDP (Gross Domestic Product”. “This is determined by two factors: the acceleration of consumption and the contribution that trade has to GDP, both direct and indirect contribution, “he adds.
Thus,” in general terms, for each additional euro of VAT refund (based on the VAT refund of 2019 for tax free purchases that was 2,570 million euros), demand increases by 1.45 euros and GDP increases by 35 cents, “he says.
In addition, the Global Blue manager emphasizes that “it is wrong to think that there is a fiscal loss; in developed economies, exports are not taxed with consumption taxes (VAT); in Tax Free shopping, the operation is an export and, therefore, it does not carry VAT. The problem is that when the traveler buys in the store he has to pay VAT because he has not yet cleared customs and once he has proven that he passes customs, we refund the VAT “.
Spain competes with countries such as Germany, France, Italy or Portugal to attract British and non-EU shopping tourists. It does so from a share of just 9%, but with the potential that it is the favorite destination of the English.