The United Kingdom’s tourist tax policy is sparking significant concern among leading retail executives. A collective of over 300 CEOs is urging Rachel Reeves to reintroduce VAT-free shopping for tourists. The current policy is believed to be causing substantial financial losses and putting the UK at a global competitive disadvantage. Retailers argue it adversely affects the entire economy, not just luxury brands. Previous government assessments of the policy’s impact have been challenged by industry leaders.
In a recent initiative, more than 300 chief executives from top UK businesses, including prominent names like John Lewis and British Airways, have come together to address the issue of the United Kingdom’s tourist tax. They have collectively signed a letter urging Rachel Reeves to consider reintroducing VAT-free shopping for overseas visitors in her upcoming Budget. The signatories argue that the removal of tax-free shopping places the UK at a significant global disadvantage, affecting a broad spectrum of the tourist economy.
The term ‘tourist tax’ refers to the policy scrapping VAT-free shopping for tourists, initially enforced by then-chancellor Rishi Sunak as part of post-Brexit adjustments. While the Treasury has suggested that reinstating this scheme could result in a £2 billion loss in yearly tax revenue, retail executives dispute these figures. They highlight research from the Centre for Economics and Business Research, indicating a much larger economic impact, with £11.1 billion lost in GDP and two million fewer tourists each year. Brian Duffy, CEO of the Watches of Switzerland Group, emphasised the potential economic gains from reintroducing VAT-free shopping, noting it could positively affect UK economic growth instantaneously.
Despite these concerns, the Office for Budget Responsibility (OBR) has previously validated the Treasury’s analysis, suggesting that the removal of the tourist tax would not significantly affect the UK’s economic productivity. Nevertheless, retail leaders are advocating for a fresh, unbiased review of the matter, highlighting the broader negative consequences on British tourism and businesses reliant on this sector. They argue that the tourist tax burdens not only high-end retailers in London’s West End but also has widespread implications for the hospitality and retail sectors nationwide.
Retail executives are pressing for decisive action, outlining that the current tax regime deters international visitors from spending in the UK, thus impacting businesses that depend on tourism revenue. Prominent figures like Sir Rocco Forte have reiterated that reintroducing VAT-free shopping would align the UK with other European nations, enhance tourism, and foster economic growth. As pressure mounts on Rachel Reeves ahead of her Budget announcement, industry leaders are hopeful that the government will reconsider its stance on the tourist tax.
The ongoing debate over the tourist tax emphasises the need for a balanced approach that considers both the economic imperatives and competitive positioning of the UK in the global market.
