Britain floundering as tourist tax bites: Calls for Chancellor to take action

European countries are reaping the rewards of tax-free shopping schemes for tourists while the UK misses out, new statistics have revealed – re-igniting calls for Chancellor Jeremy Hunt to take urgent action.

London is floundering thanks to its tourist tax while rival cities in France, Portugal and Italy have seen their pandemic recoveries buoyed by visitors flocking back to buy luxury goods.

European sales via refund schemes are getting closer to a pre-pandemic peak, after increasing 10 per cent in May from the previous month, according to data from retail tech firm Planet.

It means tax-free sales in Europe are just 14 per cent below where they were in May 2019.

This represents the best month for retailers on the continent since the end of the pandemic.

And the UK is set to score an own goal this summer as American and Chinese tourists return to the continent with cash to spend on pricey goods abroad.

There was a 27 per cent uptick in the amount US tourists spent with European retailers in May compared with April, as the summer tourism season gets into full swing.

This means sales to US customers are now 71 per cent above pre-pandemic levels and 83 per cent higher for the year to date – but they are taking their custom to other countries and shunning the UK.

Tax-free sales of luxury products to international visitors surpassed pre-Covid levels in France last month, with Portugal also enjoying a recovery to its 2019 levels.

‘While European retailers look forward to the prospect of further summer growth – as US and Chinese visitors continue to spend across the continent – UK retailers continue to be disadvantaged by the lack of a Tax-Free shopping scheme which means they are not competing on a level playing field,’ Luca Cassina, president of retail at Planet, claimed.

It comes as London risks losing its status as a premier destination for tourists to shop, endangering a wider ecosystem of hotels, restaurants and cultural gems.

More than 300 business leaders have backed The Mail’s ‘Scrap The Tourist Tax’ campaign, which was launched to echo industry pleas for the Government to change its stance.

Thierry Andretta, the boss of Mulberry, has also joined criticism of the levy, saying last week there was ‘no doubt’ the tourist tax had dragged down UK sales while stores in European capitals were flourishing.

It came after the company sounded alarm bells over the policy when it announced it was closing its flagship store on Bond St in February, which had seen a ‘dramatic drop’ in trade since the tax was introduced.

Critics say that – far from the Treasury’s claim that scrapping the tourist tax would cost £2billion a year – there would be a net gain of around £350m.

A Treasury spokesman said: ‘We are backing high street retailers by slashing business rates bills by 75 per cent and effectively cutting corporation tax by £27billion through full-expensing.’