Kiki McDonough, the jeweler favored by Princess Diana, Kate Middleton and Queen Camilla, has slashed prices by 20% in an attempt to offset the impact of the so-called ‘tourist tax’.
This summer, McDonough offered the discount to US and Australian shoppers, aiming to soften the impact of the abolition of VAT-free shopping for tourists in 2020, a measure introduced by then-Chancellor Rishi Sunak.
The luxury industry has been vocal about the negative impact of the policy, with McDonough noting a significant drop in the number of American tourists, who are its second largest market. The 20% discount helped lure overseas customers back to her boutique in London’s Sloane Square. “It’s amazing how many people were brought back then [with the discount]she said.
The abolition of VAT-free shopping has resulted in tourism spending shifting to other European countries such as France and Spain, while Britain has seen a decline. McDonough argues that luxury shopping is an essential draw for tourists, with wider economic benefits. “Luxury is not considered that important in this country,” she said, highlighting the ripple effect this is having on other sectors, including hospitality and tourism.
While the Office for Budget Responsibility estimates that scrapping tax-free shopping will save £540 million over the next two years, McDonough believes Labor should reconsider reintroducing the perk to boost economic growth. She emphasized that it is not just about luxury goods, but the broader experience and expenditure associated with tourism.
McDonough, who founded her company in the 1980s, also raised concerns about the government’s focus on large corporations at the expense of smaller businesses like hers. She called for less red tape and more support for young entrepreneurs, urging politicians to create an environment that encourages risk-taking and business growth.
A Treasury spokesman reiterated that the government faces difficult decisions in the upcoming budget as it aims to close the £22 billion hole in public finances left by the previous government.