Chancellor Jeremy Hunt has ordered a review into the “tourist tax”, which currently denies overseas visitors the ability to reclaim VAT on shopping. raising hopes that he is ready to reverse the policy.
The Conservative government scrapped VAT-free shopping for international visitors to the UK in 2020 in an attempt to raise more money for the exchequer, however, business groups have repeatedly warned that the measure has placed the UK at a competitive disadvantage compared with other shopping destinations across Europe.
Recent data analysis has suggested that the UK is losing out on high-spending international visitors, raising questions over whether the tax change has increased the exchequer’s revenue or not. Richard Hughes, chair of the Office for Budget Responsibility, said the body had been asked by the Treasury to “examine the costs and benefits” associated with the tax.
The review follows pressure from the British Chambers of Commerce director general Shevaun Haviland, Tina McKenzie from the Federation of Small Businesses and Heathrow Airport chief executive Thomas Woldbye.
Writing in The Times, they said: “Almost overnight, tourists saw prices hiked by 20% compared to this country’s closest European neighbours, delivering a blow to British businesses at a time when many were struggling to survive.
“The reality is every sale diverted from British tills to the European continent puts at risk the wages and livelihoods of thousands reliant on retail and the domestic side of its supply chain. Hotels, restaurants and attractions right across the UK all benefit from getting tourists through the door.”