The truth about the money of products sold out of VAT to tourists

It is just 9:30 am, the Galeries Lafayette Iron Curtain has just been lifted that hundreds of Chinese tourists are already jostling to find the last Chanel or Hermès bag.Their time is counted: they only spend one and a half day in France, and it is in Paris that they spend almost 80% of their shopping budget.For the past four years, to the happiness of luxury brands and department stores, expenses in Chinese detaches in France have been multiplied by 6.5.

Their average basket jumped 80% over the same period to reach summits: in 2012, the Chinese spent 1.500 euros on average per act of purchase!"It is not rare that the Central Caisse des Galeries records for the same customer an invoice of ten thousand euros", testifies a seller of the department store.Luxury products are 20% cheaper on average than in their country, and the Chinese, like all non -European visitors, benefit, in addition, from a period which reimburses them all or part of the VAT (at 19.6%) on each of their purchases, the price of which is more than 175 euros.

A major advantage for luxury brands

A European directive supplemented by the Customs Code stipulates that a merchant can reimburse all or part of the VAT to customers who justify the effective exit of the goods outside the territory.At the airport, they thus buffer their purchasing slip by customs, then recover the money from the reimbursement, either in cash at the counter of a specialized company, oneself via a transfer to their account.Luxury brands have understood that they could draw from this partial reimbursement of VAT a competitive advantage at low cost."This is a service that we render to our customers," said Anne Sarah Panhard, director general of Hermès France, modestly notes.

In fact, a whole very lucrative business has been built around the management of this period.Chanel or Louis Vuitton reimburses only 12% on the amount including tax of the product, and Hermès only 10%.But, for the customer, it is already a great discount.For example, a Chinese tourist buying a 1 bag 1.000 euros will receive 120 euros on a VAT which represents 164.The balance, the 44 euros difference, is pocketed by intermediaries, like Global Blue or First Free Tax, who manage the period of period for brands.A flourishing business.

Ultra-confidential retro-commissions

But luxury brands are not forgotten.They discreetly granted a small margin on this VAT reimbursement."It's ultraconfidentiel", eluded, a little embarrassed, Eric Noyal, Managing Director of Global Blue who, with first free tax, Truste 80% of the Detain market in France.His competitor Gregory Briand, from Euro Free Shopping, is more talkative."Luxury brands take a margin which corresponds to an average of 2 to 3% of the amount including tax of the purchase."So that on a bag bought 1.000 euros, a Chinese tourist will receive 120 euros, the intermediary 24 euros, and the luxury brand at least 20.At the end of the year, luxury claws make their accounts: thanks to a very partial refund of VAT, they round their margins of a few tens of millions of euros.

At the Galeries Lafayette Haussmann, more than half of the turnover of which is achieved thanks to the purchases of tourists, the non-reimbursement of all VAT reported, in 2012, 30 million euros."There are, of course, IT costs linked to the management of financial flows, but they have been amortized for a few years," recognizes a member of the store's financial management.A little butter made on the back of a partially reimbursed VAT to tourists and whose state will not see the color.

The only loser is the state

In 2012, the Détacix market in France represented a volume of around 4 billion euros, up 25 to 30% per year.An amount on which the State therefore does not receive VAT, or more than 650 million euros in the shortcoming."We imagined in 2011 to raise the reimbursement threshold of VAT beyond 175 euros to bring a little more VAT into the state funds, but it is a device supervised by Brussels", explains-Are we at the Directorate General of Customs.

For some parliamentarians such as the socialist deputy Jean-Yves Le Déaut, this "advantage gave to tourists for the purchase of luxury products may seem unwelcome, when our fellow citizens are asked for an effort".This is the meaning of the written question he asked Pierre Moscovici, Minister of Economy and Finance, on December 11.Not touch, replied the minister on February 12."The tightening of the conditions of the period could lead to an eviction effect of purchases made by tourists to neighboring states, in particular to Germany or the United Kingdom, where the period is granted from the first euro", details theminister.And he specifies that Paris remains in the first European rank of shopping tourism.A precise argument blown by the very active lobbying of the Colbert Committee, representing luxury houses, which has its entries in Bercy.

Frauds are many because very easy to achieve

Tourists are therefore guaranteed to keep their discount of approximately 12% on luxury products.And they are not the only ones.Very organized sectors also exist.Customs no longer have the means to control all the outputs of goods from the territory.The buffer of the slips is almost automatically.'We have two agents per terminal during the day' recognizes Alain Fillion, chief of customs controls in Orly, who aims each year 300.000 Details slip.

Customs minimize: the services communicate on 1.019 case of fraud in 2011.Tampons trafficking or false outings from the territory constitute the great classics.As illustrated by the case of this Chinese woman who presented himself as Personal Shopper at the Galeries Lafayette.In 2011, she bought for 2 million euros of Chanel bags supposed to be delivered to Hong-Kong, which were sold in French deposits.Meanwhile, she had obtained a discount of 24.000 euros thanks to the period.Not bad for a brand that never makes sales.