Business leaders call on Chancellor Jeremy Hunt to reinstate tax-free shopping for overseas visitors

A coalition of business leaders today calls for the return of tax-free shopping for overseas tourists.

In a letter to the Chancellor, scores of retail, hospitality and tourism bosses warn that removing the VAT refund for visitors has been an ‘extraordinary own goal’.

Reinstating it would be a win both for business and the taxpayer, they say, with research suggesting it could bring a multi-billion-pound boost to the economy.

Today the Mail launches a ‘Scrap The Tourist Tax’ campaign in support of firms demanding the Government thinks again.

Sir Rocco Forte, British Airways and Fortnum & Mason all argue that the cost of 20 per cent VAT refunds is outweighed by the enormous benefits of encouraging more visitors to Britain.

Sir Rocco Forte (above), who organised the letter to Chancellor Hunt, told the Mail that bringing back tax-free shopping would stimulate growth and be an ‘easy win’ for ministers

These extra tourists would spend across the economy and nation – on hotels, restaurants, entertainment and transport – generating tax revenues and creating jobs.

Tax-free shopping would bring a much-needed £4.1billion boost to GDP and support 78,000 jobs, according to research by Oxford Economics. 

And despite the Treasury claiming it would cost it £2billion in lost taxes, experts have estimated there would in fact be a net gain to the Exchequer of at least £350million a year.

Sir Rocco, who organised the letter to Jeremy Hunt, told the Mail that bringing back tax-free shopping would stimulate growth and be an ‘easy win’ for ministers.

‘Jeremy Hunt blithely talks about growth, and is doing nothing to help growth at the present time,’ he said last night.

‘This would help growth significantly and it certainly has no impact on inflation. There is no reason not to do it.’

The 68 signatories to the letter to Mr Hunt include the chairman of British Airways and the chief executives of Mulberry, the Royal Opera House and Fortnum & Mason, as well as the business director of Bicester Village.

The letter brands the decision in 2021 to scrap the longstanding scheme that allowed international tourists to shop tax-free as ‘puzzling’ and ‘ill-timed’.

Liz Truss sought to reintroduce the VAT rebate during her short tenure in No10, but Mr Hunt reversed the decision last autumn.

Tax-free shopping would bring a much-needed £4.1billion boost to GDP and support 78,000 jobs, according to research by Oxford Economics 

The 68 signatories to the letter to Mr Hunt include Fortnum & Mason as well as the business director of Bicester Village

The letter states: ‘Every country remaining in the EU now offers tax-free shopping, while we don’t. Effectively, we have suddenly started charging 20 per cent more than other countries do for the same goods. 

The Treasury claims this move is saving the taxpayer £2billion a year, but this is flawed and misleading. 

The foreign visitors who have traditionally come from the US, Middle East, China and elsewhere to shop for the best of British inject large sums into the broader economy, on top of what they spend on retail purchases.’

Shopping has traditionally been one of the most popular reasons for visiting the UK, and the tax-free scheme helped cities like London, Manchester and Edinburgh, as well as retail villages.

But the removal of the VAT refund is driving tourists away from London to cities like Paris, Madrid and Milan, campaigners say.

Earlier this year, Mulberry closed its store in London’s Bond Street as a result of the loss of tax-free shopping.

Research also suggests the UK’s recovery from the Covid-19 pandemic is being hampered by the removal of the scheme. 

Britain is now at 64 per cent of 2019 levels of consumer spending, while France has recovered to 108 per cent, according to data from tax refund experts Global Blue.

The letter concludes: ‘It is clear that the removal of tax-free shopping is turning into an extraordinary own goal for the UK.

‘We understand that there are pressures on the public finances at the present time. But the evidence shows that reinstating tax-free shopping would be a win for both business and the taxpayer.’

Sir Rocco said Britain’s future looked ‘very bleak at the moment’, and he had ‘never been so depressed since the 1970s about the way things are going’.

‘We’ve really given up in this country in terms of seeing this country move forward and grow and be prosperous,’ he said.

He urged the Government to seize the benefits of Brexit by introducing tax-free shopping for Europe, which was not the case before the UK left the EU.

‘There is no point in Brexit unless you do something with it,’ he said. 

The hotelier said he had noticed that forward demand for business in Italy, where he owns several hotels, is ‘much stronger than it is for the UK’.

The chief executive of Mulberry, Thierry Andretta, warned that the removal of tax-free shopping for tourists was causing ‘significant’ harm to British brands, retail and hospitality. 

‘If we are going to be able to get the UK economy back to growth, we need a level playing field with Europe as currently we simply cannot compete, with Paris, Berlin and Milan all benefiting at our expense,’ he said.

‘This is not just about shopping tourism – this is about restaurants, hotels, live entertainment, and museums, as well as about job creation.’

Manju Malhotra, chief executive of Harvey Nichols, another signatory to the letter, said EU and international residents had ‘diverted their spending from the UK into Europe with the financial incentive of being able to shop tax-free’.

‘This doesn’t just impact retailers like Harvey Nichols but the whole ecosystem of hospitality and businesses across the UK, which benefit from high-value customers visiting our country,’ she said.

‘Furthermore, British citizens now qualify for tax-free shopping and are electing to spend in Europe rather than within the UK.’

Brian Duffy of Watches of Switzerland said: ‘The removal of tax-free shopping for international visitors has been felt by businesses across the UK, particularly in key tourist destinations such as London, Manchester and Edinburgh.  

‘Tourists are switching their travel plans to visit cities like Milan or Paris, and the result is a drop in footfall and sales for the UK’s hospitality and retail industries.’

Last night senior MPs joined the clamour of calls urging the Treasury to rethink. Conservative former business secretary Jacob Rees-Mogg said: ‘Tax-free shopping encourages tourism, boosts the economy and costs nothing.

‘Foreign visitors will spend money elsewhere rather than pay an extra tax on the UK so everyone loses under the current system.’

Tory former trade secretary Dr Liam Fox added: ‘We need to look at the wider picture for UK businesses, including the hospitality industry, and get away from simplistic bean counting assumptions.’

A government spokesman said: ‘We are committed to an approach to the public finances that is responsible and helps get debt down. 

‘Estimates from the independent Office for Budget Responsibility show implementing a wide-ranging tax-free shopping scheme would come at significant cost.

‘Tax-free shopping continues to be available for all non-UK visitors who purchase items in store and have them sent directly to their overseas address.’