Loss of tax-free shopping costing the UK £4.1bn, say London bosses
Scrapping the tourist tax could generate £4.1bn annually for the UK economy, new research suggests, as a cluster of prominent business owners call for the government to reinstate VAT shopping for international tourists.
Rishi Sunak scrapped the tax which saw international shoppers able to claim 20 per cent back with their purchases. It was largely popular with wealthy tourists who would travel to London to splurge on designer goods.
However, many of these travellers are now choosing central Europe hotspots such as Paris, where they can claim tax back on luxury goods.
Fresh calls have now been made to scrap the tax by corporate campaign group BusinessLDN, which in a letter to HM Treasury said the UK was now missing out on £4.1bn annually by cutting the scheme.
Removing the tax would also create an additional 78,000 jobs for the UK economy, according to data from Oxford Economics.
“The tourist tax is an economic own goal. Re-introducing the VAT reclaim scheme would boost UK’s flatlining economy through increased spending from international visitors in our shops, restaurants, hotels and more,” John Dickie, chief executive at BusinessLDN, said.
“And thanks to spending that can’t be reclaimed, the increase in spend would also deliver an extra £350m in tax revenues for the Exchequer every year. This is a win-win for the economy, public finances and the country. We need to act now to show the world that Britain is open for business.”
Heathrow chief commercial officer Ross Baker has also spoken out against the tourist tax, describing the removal of the scheme as “disastrous” for UK competitiveness as goods in Europe are up to 20 per cent cheaper.
He said: “Whilst tourist spending in France surges past 2019 levels at a record €58bn (£49.7bn), the UK falls well short of 2019 levels at £26bn.
“Heathrow echoes calls urging the government to take up the opportunity to introduce a new digital tax-free shopping incentive, which would reinstate the UK’s international competitiveness and deliver economic growth to every part of the country.”
The move has also received backing from London mayor Sadiq Khan, who said he has “long been calling” for the government to restore tax-free shopping for international visitors.
“It would help to increase the number of international tourists who visit London and the United Kingdom, which in turn will provide a much-needed boost to businesses and high streets across the country – while providing billions of pounds to the Treasury each year.
“It is a quick way for the government to grow the economy and support sectors that have suffered disproportionately from the pandemic and the current cost of living crisis.”
Dee Corsi, chief of the New West End Company, argued the tax was having serious economic consequences on London businesses.
“Parliament’s decision to debate tax-free shopping, with cross-party support, is a sign of how serious this issue is for Britain’s economy and businesses,” she said.
“The ‘tourist tax’ has already had a negative effect on many businesses in the West End and beyond, as retailers, hospitality, and leisure providers grapple with the loss of spend being diverted across the Channel.”