Hundreds of business leaders are advocating for the reintroduction of tax-free shopping for international tourists. In a letter to the Chancellor, prominent UK retailers, hotels, and restaurants argue that abolishing the VAT refund for visitors was a significant misstep.
The signatories, which include major brands like John Lewis, Estee Lauder, and Fortnum & Mason, urge Rachel Reeves to focus on stimulating economic growth in her upcoming Budget. Over 300 firms assert that reinstating the VAT refund would benefit both businesses and taxpayers, providing an immediate economic boost.
Supporters of a policy review on October 30 also include Giorgio Armani, Pernod Ricard, and the owner of Westfield shopping malls. They argue that the benefits of encouraging more tourists far outweigh the costs of the 20% VAT refunds.
TAX Chief executives of Britain’s best-known and biggest pub groups and restaurants have penned an open letter to the chancellor Rachel Reeves, urging her to take action on business rates in next week’s Budget.https://t.co/AaPj6RkJw4
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The UK is currently the only European country without a rebate scheme, placing British businesses at a global disadvantage. Tourists are now favouring Paris, Milan, and Berlin for their shopping, boosting those economies at the UK’s expense.
The letter to Reeves, organised by hotelier Sir Rocco Forte, includes signatures from brands like Kurt Geiger and Charlotte Tilbury. Figures from the arts sector, such as Shakespeare’s Globe and the Royal Opera House, also support the initiative, highlighting that tourists spend on cultural attractions as well.
Reeves aims to be the most pro-growth Chancellor in British history, but her initial tenure has included warnings of tax hikes for businesses, including increased National Insurance contributions. This has raised concerns about potential capital flight.
Angela Rayner’s new workers’ rights proposals are also causing difficulties for businesses looking to hire. The removal of tax-free shopping for international visitors, initiated by former Chancellor Rishi Sunak in 2021, means shoppers pay 20% more for goods in the UK compared to Europe.
Despite previous calls from businesses to remove this tax, the Conservative government maintained it, citing it as a costly relief that didn’t benefit all of Great Britain equally. Cross-party MPs and peers, including former Home Secretary Priti Patel, back the campaign to scrap the tourist tax, along with businesses such as Harrods.
A study by the Centre for Economics and Business Research suggests the UK economy could gain £11.1 billion annually from reinstating VAT refunds, with a £2.5 billion boost to government revenues. An estimated 2 million additional tourists could visit the UK, contradicting previous claims that the policy change wouldn’t deter visitors.
Before Brexit, the scheme was available only to non-EU visitors, like those from the Middle East or the United States. Scrapping the levy would allow EU tourists to benefit from tax-free shopping in the UK for the first time.
The letter urges the Chancellor to heed the business community’s call to promote growth and scrap the tourist tax. Campaigners argue the tax adversely affects not just luxury retailers but a wide range of businesses, including manufacturers, taxis, local museums, and cafes.
Sir Rocco Forte, chairman of Rocco Forte Hotels, emphasises that Labour has promised to prioritise measures that promote economic growth, with scrapping the tourist tax being a top priority. Anda Rowland of Anderson & Sheppard and Andrew Carter of Chapel Down highlight the negative impact on spending and growth due to the current policy.
The list of businesses calling for the removal of the tourist tax includes a wide array of companies across various sectors, from retail and hospitality to the arts and travel industries. They collectively express the urgent need for action to support economic recovery and growth.
What Other Media Are Saying
- The Guardian reports that the UK government may reconsider VAT-free shopping for tourists, following a review by the Office for Budget Responsibility, amidst industry backlash and economic impact assessments.(read more)
- International Retail emphasizes the significant impact of ending VAT-free shopping on UK retail and hospitality, highlighting £10 billion in tourism spend and £4 billion in GDP annually if reinstated.(read more)
Frequently Asked Questions
Here are some common questions asked about this news
Why are business leaders advocating for the reintroduction of tax-free shopping for international tourists?
They believe abolishing the VAT refund was a significant misstep and reinstating it would boost economic growth.
Which major brands support the reintroduction of the VAT refund for tourists?
Supporters include John Lewis, Estee Lauder, Fortnum & Mason, Giorgio Armani, and Westfield shopping malls.
How could reinstating VAT refunds benefit the UK economy?
A study suggests it could add £11.1 billion annually to the economy and boost government revenues by £2.5 billion.
What is a key argument for bringing back tax-free shopping for tourists?
Encouraging more tourists to shop in the UK outweighs the costs of the 20% VAT refunds.
How has the removal of the VAT refund affected UK businesses?
It’s placed UK businesses at a global disadvantage, with tourists favoring cities like Paris, Milan, and Berlin instead.