Britain to review airport shop sales as retailers pocket tax savings

(Adds comment from retailers WH Smith (LSE: SMWH.L - news) , Dixons Carphone (Stuttgart: CWB.SG - news) )

LONDON, Dec (Shanghai: 600875.SS - news) 31 (Reuters) - Britain is to review airport retail sales after some businesses were found to be pocketing about half of tax savings meant for passengers, rather than passing on the discount, the government said on Thursday.

Most retailers at British airports, who include WH Smith and Dixons Carphone, ask passengers to show boarding cards when paying for goods, typically citing security as the reason. A newspaper reported in August, however, that some use the information to avoid paying 20 percent value-added tax (VAT) on goods headed outside the European Union.

The report prompted a backlash from consumers, with many refusing to show their boarding cards to retailers.

Announcing the review on Thursday, the government said in a statement that some airport retailers were keeping up to an estimated 50 pence of every pound of potential sales tax savings, instead of passing them on to consumers.

"VAT relief at airports is intended to cut prices for those travellers - not be a windfall gain for shops," British finance minister George Osborne said in the statement.

Many people could be paying over the odds for their purchases because the tax concession was not passed on, he said. "This is simply unacceptable."

A spokesman for WH Smith said it would cooperate fully with the review. The company also said over half of its airport sales comprising items like newspapers, books and sandwiches, did not attract VAT.

"The limited benefit that we obtain in our other product categories, where customers travel outside of the EU only, is reflected in our single pricing policy for all customers, which overall provides better value," a spokesman said. Dixons Carphone said it had no further comment to add.

The review, which will be conducted by Britain's tax agency and will report in early 2016, will consider ways to ensure prices reflect VAT savings, as well as savings on duty, the government said. (Reporting by Li-mei Hoang and Paul Sandle; editing by David Clarke (Toronto: CKI.TO - news) and William Hardy)