Chancellor to “Look Again” at Controversial Tourist Tax

The Government has promised to look again at the data around its controversial ‘Tourist Tax’ after statements that tax-free shopping is not a reason for people to visit the country were branded “complete nonsense”.

Hospitality leaders have warned that tourists were bypassing Britain since VAT refunds for overseas visitors were scrapped following a post-Brexit review of tax policy in 2021, under then chancellor Rishi Sunak.

Responding to a question from Conservative MP Sir Geoffrey Clifton-Brown, chancellor Jeremy Hunt said: “We want to do everything possible to make our tourism and our retail industry competitive and we want to encourage international visitors.

Since the onset of Brexit, visitors to the UK have not been able to take advantage of VAT-free shopping, due to a change in the rules which the Government claimed would save the country billions of pounds.

MP Sir Geoffrey Clifton-Brown criticized the Government’s approach, in the commons, saying: “When the Government are looking for growth measures, why has the Treasury dismissed this opportunity so quickly, without any comprehensive cost-benefit analysis?” he asked.

“The Treasury constantly repeats the claim that evidence shows that tax-free shopping is not a significant reason for people to come to this country, but the actual figures show that that is complete nonsense.”

Sir Geoffrey cited data that UK shoppers spent around £500m on tax-free shopping in the EU in 2022, with the figure set to double this year.

“Our people are going out and benefiting EU countries potentially to the tune of £1 billion,” he continued. “The Association of International Retail has made a rough estimate, from the behaviour of British tax-free shoppers, of what could happen were Britain to offer tax-free shopping to EU visitors.

“The EU has six times more people than Britain, so if that level was replicated by the EU shoppers we allowed to shop tax free in this country, the £1 billion of tax-free shopping that our people do in Europe could be turned into up to £6 billion.”

UKHospitality chief executive Kate Nicholl saids: “It’s positive that the government continues to look at the future of tax-free shopping. I would urge them to widen their focus and give consideration to the benefits of a lower rate of VAT for hospitality, which would deliver lower prices for consumers and drive business growth.”

Kwasi Kwarteng had announced plans to reintroduce tax-free shopping during his short-lived tenure as chancellor last year, but this announcement was reversed.

Responding to the question, Chancellor Jeremy Hunt said the policy would be looked at again.

“We want to do everything possible to make our tourism and retail industry competitive,” he said. “We want to encourage international visitors.

“We changed policy on this issue a year ago because it cost around £2.5 billion a year and we did not think we could afford to continue it, but we are looking again at the numbers in the light of the most recent data and we can see what has happened to comparative shops in Paris and Milan.”

“We will review this to see if it is still that expensive, and I hope that it is not.”