The Association of International Retail has submitted its proposals for the reintroduction of a tax-free shopping scheme in the UK, stating that “The situation and the facts have changed”.
The scheme was scrapped in 2021 following Brexit, and in September 2022 then UK Chancellor Kwasi Kwarteng confirmed plans to reintroduce tax-free shopping for overseas visitors, as part of his doomed “mini budget”.
But this was quickly scrapped by his replacement Jeremy Hunt, who said “not proceeding with this scheme is worth around £2 billion a year”.
Ahead of this week’s Spring Budget the AIR said “The evidence of actual spending by non-EU visitors to Europe in 2022 shows a £1.5 billion spending loss as a result of ending tax-free shopping”, and added that “the evidence of British people shopping tax-free in the EU suggests that Britain is missing out on a unique new £10 billion market which would not be so focused on London”.
The association said that reintroducing tax-free shopping “would reverse the growing diversion of spending by non-EU visitors away from Britain to continental Europe, shown by all data on actual spending levels”.
“Many international visitors to Europe are on multi-country tours and all the evidence shows they are choosing to shop more outside the UK as they become aware that they cannot claim back VAT from purchases made in Britain,” it added.
Back in November the AIR submitted evidence to the Treasury which it says showed that in 2022, spending by non EU visitors in mainland Europe rose to 198 per cent of 2019 levels but fell by 28 per cent on 2019 levels in Britain.
The association said that early indications suggest that the situation worsened in 2023 and will continue to do so in 2024, “as highly price sensitive Chinese visitors, the world’s biggest spenders, reduce their spending in the UK by nearly 70 per cent, representing an additional £700 million loss for British stores”.
The AIR concluded that “all the evidence on actual spending levels is consistent in showing that the Treasury’s initial assumption that tax-free shopping had no impact on international visitor spending is not correct”, and urged the government to reintroduce the scheme.
The submission follows last week’s open letter – signed by organisations including the Scottish Chambers of Commerce, Heathrow and the Federation of Small Businesses – which again urged the government “to introduce a new, internationally competitive, tax-free shopping scheme for international visitors at the Spring Budget”.
The letter said that the removal of tax-free shopping “has had a negative impact on business revenue in Scotland, and for some, forced us to downsize operations, take steps to reduce our UK footprint and mitigate the impact across supply chains”.
In August last year a report by the Centre for Economics and Business Research (CEBR) showed what it said were the “clear economic benefits associated with a VAT refund scheme”, and concluded that the scrapping of the scheme is having the effect of deterring two million tourists a year, resulting in £10.7 billion in annual lost GDP.
New report shows scrapping of UK tax-free shopping deterring two million tourists a year
