Retail leaders claim the end of VAT-free shopping is harming the UK economy.
- A letter signed by over 300 business leaders demands tax reform.
- The government claims reinstating VAT-free shopping costs too much revenue.
- Research suggests the UK loses £11.1 billion annually due to the policy.
- Pressure mounts on Rachel Reeves to abolish the tourist tax.
Retail leaders have voiced strong concerns about the ongoing impact of the tourist tax, noting it significantly disadvantages the UK in the global market. They argue that the abolition of VAT-free shopping has harmed Britain’s appeal as a travel destination. The letter, signed by executives from major companies like John Lewis and British Airways, strongly advocates for the reintroduction of tax-free shopping to restore competitiveness.
The tourist tax, which involves the removal of VAT-free shopping privileges for international visitors, was initiated by former Chancellor Rishi Sunak post-Brexit. The Treasury argues that reversing this policy would lead to a loss of £2 billion in annual tax revenue. However, retail experts contest this viewpoint, suggesting that the policy overlooks substantial economic benefits that increased tourism could bring.
According to the Centre for Economics and Business Research, the current policy results in an approximate £11.1 billion annual GDP loss and deters an estimated 2 million tourists each year. Brian Duffy, CEO of the Watches of Switzerland Group, emphasised, “The new Labour Government says that growth is its priority. Bringing the UK in line with other countries and removing the tourist tax would make an immediate positive impact on UK economic growth.”
Former Chancellor Jeremy Hunt arranged for a review of the tourist tax impact by the Office for Budget Responsibility (OBR), which concluded that the Treasury’s predictions were accurate. Despite these findings, the retail sector continues to push for a reassessment, calling for decisive governmental action to address what they see as fiscal harms.
Retailers note that the economic burden of the tourist tax extends beyond luxury stores, affecting the entire hospitality and retail sectors. They argue that the tax disincentivises international spending in the UK, which is vital for businesses reliant on tourism income. As Rachel Reeves prepares for her upcoming Budget, the pressure from retail leaders continues to build, urging for the tax’s removal to potentially rejuvenate the UK’s post-Brexit economy.
The UK’s economic future remains uncertain, with the tourist tax policy at the centre of a growing debate on national competitiveness.
