UK. The removal of tax free shopping for visitors to the UK was “both short-sighted and incredibly damaging” to UK tourism. That’s according to a House of Commons Committee report, in which MPs hit out at the decision to reinstate tax free shopping (including VAT-free shopping airside) and then remove it again.
As reported, on 23 September 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. But in a further u-turn on 17 October, the new Chancellor Jeremy Hunt reversed the move.
Tax free sales at UK airports had previously been withdrawn for all outbound passengers from 1 January 2021 on goods other than liquor & tobacco. That included the all-important fragrances & cosmetics category, as well as fashion, luxury, and consumer technology.
In a report published yesterday on how tourism can recover from the COVID-19 pandemic, the Digital, Culture, Media and Sport (DCMS) Committee concluded that government policies had made the industry’s job harder, by making it more difficult for visitors to come to the UK and less likely to spend.
It said that the removal of tax-free shopping for tourists was “short-sighted and incredibly damaging”. It also noted that the “short-lived revival” before the u-turn highlighted the inadequacy of the Treasury’s analysis. And it said that new barriers to visitors “demonstrates a failure to recognise the industry’s value”.
The Committee cited the value of the inbound tourism industry – the UK’s third largest service export, worth 9% of GDP, and on which 3.2 million jobs and more than 200,000 SMEs depend.
Chair of the DCMS Committee Julian Knight MP said: “The scrapping of tax free shopping for overseas visitors has been a spectacular own goal from the government, with the subsequent on-again off-again flip-flopping symptomatic of an approach that lacks thought and recognition of the huge importance of retail to inbound tourism. Taking such decisions without the full facts is no way to make policy and has already harmed the industry on which so much of our economy depends.
“In an increasingly competitive global market, Britain cannot just rely on its reputation alone to attract visitors. It must make it easier for people to travel and access the full range of outstanding attractions all over the country. But right across the board – from abolishing tax-free shopping and banning the use of ID cards for young visitors to its complacency on marketing budgets – the government have hindered rather than helped tourism recover from the pandemic. Ministers must now wake up to the voice of the industry and finally recognise its value.”
The decision to withdraw from the VAT Retail Export Scheme signals that the government does not recognise the significance of retail to the sector, adds the Committee in its report.
“After committing once again in the fiscal event to introducing tax free shopping for inbound visitors, the decision was then reversed by the government less than a month later. That no new analysis was provide demonstrates the paucity of thought associated with the policy changes. The government should publish an assessment of the direct and indirect impact of withdrawing from the scheme.”
Click here for the full report.
