UK. Leading UK media Daily Mail has launched a ‘Scrap The Tourist Tax’ campaign in support of a coalition of travel retail stakeholders urging Chancellor Jeremy Hunt to reinstate tax-free sales for overseas visitors.
The initiative came after the UK government’s latest budget announced in March excluded a provision to reinstate this scheme despite urgings from aviation, tourism and travel retail industry players.
As reported, the tax-free scheme, which entitles foreign visitors to a VAT refund for goods purchased from the high street and airports or other departure points in the UK, was discontinued in 2021 under post-Brexit rules.
This affected the sales of goods across various categories including fragrances, cosmetics, fashion, luxury and consumer technology.
The coalition, comprised of retail, hospitality and tourism executives, wrote a letter to Hunt. They emphasise that the VAT refund for tourists would lure more overseas visitors and improve the economy.
In its letter, the coalition call the decision to scrap the VAT-free shopping scheme for international visitors as ‘puzzling’ and ‘ill-timed’, the Daily Mail noted.
The letter, organised by hotelier Rocco Forte, gathered 68 signatories including British Airways Chairman Sean Doyle and the CEOs of Mulberry, the Royal Opera House and Fortnum & Mason.
According to the Daily Mail, Forte, British Airways and Fortnum & Mason have all argued that the cost of -20% VAT refunds translates to significant tourism revenues.
The influential media title has backed this claim and said that while the Treasury asserts that removing the tax-free scheme will raise an extra £2 billion to restock its drying coffers, it is a “false economy”.
Citing a study by Oxford Economics, the Daily Mail said that reinstating tax-free shopping for tourists would draw more than 1.6 million extra tourists, driving the GDP by £4.1billion and generating about 78,000 jobs.
It added that the policy is “a serious loss” not only to luxury retailers but also to hotels, restaurants, theatres, taxis and other places where tourists spend their money.
The existing policy has dealt a blow to many major retailers including Mulberry, which shut its store on London’s Bond Street earlier this year. The retailer said that high-end retail in the capital was becoming ‘“unviable”.
Mulberry’s chief executive Thierry Andretta warned that without the tax-free incentive for tourists, this would mean significant harm to British brands, retail and hospitality providers.
In a note published by the Daily Mail, Forte also called the existing rule as “a punishing, unfair, short-sighted policy, an active deterrent to overseas shoppers”.
The Daily Mail also warned that tax revenues are “bound to fall overall” as tourists choose other destinations over the UK. In its report, the campaigners said that the removal of the VAT refund scheme has discouraged tourists from visiting London and instead choose other cities like Paris, Madrid and Milan.
It added that the absence of this tax-free scheme for tourists now proves to be “perverse and self-defeating.”
Data from tax refund experts Global Blue also suggests that the removal of the tax-free scheme will slow down UK’s recovery from the pandemic.
Compared with France, the data revealed that the UK has reached 64% of 2019 levels of consumer spending, while France has recovered to 108%. ✈
