A coalition of over 300 retail leaders has urged Rachel Reeves to reconsider the removal of VAT-free shopping for tourists, arguing it’s detrimental to the UK’s economy.
- The tourist tax, abolished post-Brexit, positions the UK as the sole European nation without VAT-free shopping.
- Retailers claim this tax is costing the UK £11.1 billion annually in lost GDP and discouraging tourists.
- Despite government resistance, industry leaders call for a fresh review of the economic implications.
- Reintroducing VAT-free shopping could bolster the UK’s economic growth, aligning it with other European nations.
In a compelling appeal, over 300 chief executives from prominent UK brands, including John Lewis and British Airways, have called on Rachel Reeves to restore VAT-free shopping for international visitors in the upcoming budget. Prominent figures such as hotelier Sir Rocco Forte and designer Sir Paul Smith highlight that the current tax policy places the UK at a ‘massive global disadvantage’. The concern is not limited to luxury retailers; it spans the entire tourist economy.
The tourist tax, implemented after Brexit under Rishi Sunak’s chancellorship, halted VAT-free shopping for tourists and has been met with significant opposition from the retail sector. Retailers argue that the government’s stance neglects broader economic gains from tourism, suggesting a loss of £11.1 billion in GDP annually and a decline in tourist numbers by 2 million per year. Tourists now favor shopping destinations in Paris, Milan, and Berlin, where VAT rebates are still available.
Brian Duffy, CEO of the Watches of Switzerland Group, emphasizes the substantial economic potential of reinstating VAT-free shopping, asserting, “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.”
Despite retail sector concerns, a review by the Office for Budget Responsibility earlier this year supported the Treasury’s view that the removal of tax-free shopping does not substantially affect the economy. Nevertheless, the sector is calling for a more objective reassessment. They argue that the tourist tax threatens the competitive edge of British businesses, affecting not only London’s luxury market but the national retail and hospitality sectors reliant on tourist spending.
Advocates for reinstating VAT-free shopping argue it would harmonize the UK with European practices, enhance tourist influx, and provide new revenue streams, thus supporting economic expansion. Many retail leaders express frustration over the government’s reluctance to respond, urging Rachel Reeves to consider the potential economic benefits as she prepares her budget. The pressure mounts for decisive government action to rectify the so-called ‘tourist tax’ and its implications on the post-Brexit British economy.
The call for reinstating VAT-free shopping for tourists gains momentum, pressing for a reevaluation of the policy’s economic impact.
