For all day events, express the dates in the local timezone (ie undo the cast to UTC)

maybe_keep_ical_alldayers_local.php

<?php
/**
 * Given an iCal item representing an all day event, replaces the start and end dates
 * which will normally have been converted to UTC with their local timezone equivalents.
 *
 * @param array   $ical_item
 * @param WP_Post $event
 *
 * @return array
 */
function ical_noconvert_all_day_events( array $ical_item, WP_Post $event ) {
	if ( ! tribe_event_is_all_day( $event->ID ) ) return $ical_item;

	// The end date gets special handling: we bump it forward one day to create
	// what iCal will (hopefully) interpret as an inclusive date range from
	// $start to $end - 1 day
	$end_date = date_create( $event->_EventEndDate )->modify( '+1 day' )->format( 'Y-m-d' );

	$start = str_replace( '-', '', Tribe__Events__Date_Utils::date_only( $event->_EventStartDate ) );
	$end   = str_replace( '-', '', Tribe__Events__Date_Utils::date_only( $end_date ) );

	foreach ( $ical_item as &$field ) {
		if ( 0 === strpos( $field, 'DTSTART' ) )
			$field = 'DTSTART;VALUE=DATE:' . $start;

		if ( 0 === strpos( $field, 'DTEND' ) )
			$field = 'DTEND;VALUE=DATE:' . $end;
	}

	return $ical_item;
}

// Maybe modify items included in the iCal feed
add_filter( 'tribe_ical_feed_item', 'ical_noconvert_all_day_events', 10, 2 );