The Daily Observer London Desk: Reporter- Victoria Smith
The Treasury missed out on more than £200 million last year because it scrapped VAT-free shopping, according to new estimates.
The controversial ‘tourist tax’ cost British retailers £1.5 billion in lost sales in 2022, said the Association of International Retail (AIR) in evidence sent to the Chancellor Jeremy Hunt in an effort to get the policy reviewed.
The AIR and retailers are calling for a review of the tax as they argue the Treasury did not take into account the hit it would have on other parts of the tourism industry such as hotels, restaurants and theatres, which are used by tourists in the UK on shopping sprees.
If tax-free shopping had not been abolished the AIR estimates the Treasury would have raised £459 million – £206 million more than it actually raised – because tourists spent less. The figures will pile more pressure on Hunt to launch a review of the measure in his Autumn Statement later this month.
VAT-free shopping allows travellers buying items in the UK to claim back VAT when they return home.
The UK axed the incentive in 2021. It was briefly reintroduced in Liz Truss’s disastrous mini-Budget, before being axed again when Rishi Sunak became Prime Minister. Earlier this month a collection of luxury retailers protested on London’s Savile Row over the tax, which the industry warns has sent overseas tourists to Paris and Milan instead of shopping hubs in the UK.
Paul Barnes, chief executive of the AIR, said: ‘Britain needs growth so it’s madness to throw away the unique opportunity to create a whole new, multi-billion pound tourist market for the whole of the UK.
‘With all this new evidence emerging we hope the Government will now seize the opportunity to make Britain the best place in the world for international shopping.’
A Treasury spokesman said VAT-free shopping ‘does not directly benefit Brits’.
He added: ‘Evidence shows that the key motivators for tourists visiting the UK are our rich history and heritage, and vibrant towns and cities – not shopping.’
