UK. In a further u-turn from the UK government – one that will come as a blow to the British retail community and tourism sector – plans to bring back tax free shopping for overseas visitors are to be scrapped.
The new Chancellor Jeremy Hunt today announced he would drop most of the measures that were set out in a mini-Budget by his predecessor Kwasi Kwarteng on 23 September.
Under the ‘Growth Plan 2022’ presented on that date, the UK Government said it intended to reintroduce a VAT-free shopping scheme on goods purchased on the High Street and past security control points at airports and other departure points for non-UK visitors.
Today, however, Chancellor Hunt said: “While we will continue with the abolition of the health and social care levy and stamp duty changes, we will no longer be proceeding with the cuts to dividend tax rates, the reversal of off-payroll working reforms introduced in 2017 and 2021, the new VAT-free shopping scheme for non-UK visitors or the freeze on alcohol duty rates.”
The statement on tax incentives was brought forward from 31 October in a bid to calm markets, with the price of UK bonds rising sharply since the mini-budget, and the UK Pound coming under increasing pressure.
The UK Travel Retail Forum (UKTRF) said it was “extremely disappointed” with the news.
UKTRF Chair Nigel Keal said: “The government’s latest U-turn on tax-free shopping is a huge blow to the travel retail industry and the airport community. With the recovery of international travel still delicate, last month’s announcement of a new airside VAT-free scheme offered our sector hope for the potentially difficult months and years ahead. We are incredibly disappointed that the Government has already turned its back on its pledge, which was unanimously welcomed by businesses and passengers alike.
“The UK is one of the only major economies not to have a VAT-free shopping scheme in place, making us globally uncompetitive.
“We appreciate difficult decisions must be made, however as the economic situation worsens, and the cost-of-living crisis threatens to impact international travel, we urge the Government to reserve judgment until it has carried out a full cost-benefit analysis to fully understand the potential opportunity.”
UKTRF is also encouraging the new Chancellor to consider what other tools he has at his disposal to help the sector, such as the introduction of arrivals duty free stores.
Heathrow Retail Director Fraser Brown said: “The reversal on tax-free shopping is a bitter disappointment. At a time where the country needs all the growth it can get as we recover from the most difficult period in our history, this tourist tax remains a significant headwind.
“Introducing a new modern tax-free shopping incentive for overseas visitors would result in a net-gain to HM Treasury with billions more in taxable spend in retail, hospitality and leisure from millions more tourists each year. Doing the opposite would cause further regression of high streets, shopping centres, ports and airports as we continue to lose out to our European competitors. We urge the Government to work with industry on implementing an internationally competitive scheme at pace to maximise growth, and we will continue to engage constructively with Ministers on the growth benefits of travel retail to the British economy.”
