Global Blue, the largest VAT refund operator, was valued at $2.5 billion in February 2025, though the deal fell through. While this might seem modest for a company claiming $300 million annual profit, their business model reveals why this industry is incredibly lucrative.

The built-in margins are staggering. VAT rates range from 10-20% across countries, but tourists only get 8-16% back, creating an immediate 10% margin on tax amounts. But the real magic happens in the execution gaps.

Even if 100% of tourists file for tax-free, how many actually make it to the airport refund counter? Maybe 75% at best. Then the system gets deliberately complicated.

Cash refunds have ridiculously low limits - in Italy, it's just 800 euros per person. Worse, they pay in USD at terrible exchange rates, adding another 5%+ margin. Everything above the limit goes to "bank card transfers" - and here's where it gets interesting.

They transfer to any bank card by card number alone. No verification, no authentication. This creates a massive fraud opportunity for those who never showed up to claim their refunds. Someone could easily use drop cards to collect unclaimed refunds while the company honestly reports their 10% commission to governments.

The paper trail disappears too. Handwritten card numbers that might be "illegible" get sent to headquarters for "5 business day processing" - by which time tourists are long gone and can't dispute anything.

Even at the reported $300 million profit, I wouldn't sell this business for $2.5 billion or even $10 billion. The hidden revenue streams from international payments, tax reimbursements, and various schemes must be enormous.

For travelers, tax-free shopping has become a sophisticated system designed to extract 5-10% at every step. What should be a simple tax refund has turned into a multi-layered profit extraction machine that benefits everyone except the tourist.

Am I wrong?