The taxman is driving tourists away from the UK to France, Italy and Spain following the axing of the country’s VAT-free shopping scheme, the Chancellor has been warned.
More than 100 leading organisations and companies have written to Chancellor Jeremy Hunt, urging him to re-introduce a scheme for international visitors in next month’s Budget.
They warn: “British shops are losing ￡1.5billion per year as non-EU international visitors choose instead to spend in France, Italy, and Spain where tax-free shopping schemes are in place.”
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Signatories include major players such as the British Chambers of Commerce, the Federation of Small Businesses and the Institute of Directors – plus groups as varied as the Bed and Breakfast Association, the Brighton Toy Museum and the Heritage Railway Association.
The scrapped VAT Retail Export Scheme allowed international visitors to reclaim the VAT paid on goods purchased but not consumed in the UK.
It came to an end on January 1, 2021, at the close of the Brexit transition period.
The Government had cast doubt on whether the scheme provided major benefits outside London and shopping attractions such as Oxfordshire’s Bicester Village. But the authors of the letter insist a revived scheme would be “welcomed across the entirety of the country” by “both big and small businesses”.
Would VAT-free shopping bring back high-spending tourists? (Image: Getty)
Conservative MP Henry Smith insisted such a move would be good for the national finances, saying: “Research from Oxford Economics clearly shows that a new re-instated tax-free shopping scheme would generate economic activity worth ￡4.1billion, and would generate an additional ￡940million of tax revenue for the Treasury – a net gain of ￡350million, not including the likely additional spend on leisure activities, food and hotels.”
The most recent tourism figures show for the key summer months of July to September, spending from China has gone down 41 percent, with Japanese spending dropping 40 percent.
Mr Smith said: “This reality has been long known by businesses across the UK who are feeling the pinch as international visitors have moved their spend to France and Italy, boosting European economies and holding back our own.”
A Treasury spokeswoman said: “We keep all taxes under review and recognise the value that retailers bring to Britain.
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“That is why we announced a ￡4.3billion business rates package at Autumn Statement to support businesses and the high street.
“VAT-free shopping remains available for all non-UK visitors buying items in store and having them sent directly to their overseas address.”
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