UK retailers are renewing their push for the return of tax-free shopping for tourists, arguing it would significantly boost the economy and help them compete with European rivals.
Retailers Unite for Tax-Free Shopping
Leading UK retailers are urging Chancellor of the Exchequer Rachel Reeves to bring back tax-free shopping for international visitors. This comes as the government prepares to outline its strategy for the so-called visitor economy.
The Association of International Retail (AIR) is at the forefront of this campaign. They believe reinstating the VAT exemption is crucial for the sector’s recovery and growth.
The Economic Case for Reinstatement
According to AIR, making purchases exempt from VAT could inject an additional £3.65 billion into the UK economy from EU visitors alone. This is a significant figure, highlighted in their recent submission to ministers.
Beyond the EU, the lobby group estimates the UK has already lost about £1.5 billion in spending from non-EU visitors. This spending, they argue, was diverted away after tax-free shopping was abolished in 2021.
A History of Disagreement
The debate over tax-free shopping has been a long-standing one. Then-Chancellor Rishi Sunak ended the system in 2021, using the UK’s departure from the EU as an opportunity to scrap the 20% VAT sales tax rebate for travelers.
Both Conservative and Labour governments, with the brief exception of Liz Truss’s administration, have largely agreed with Sunak’s view. They maintained that the policy cost the Treasury more than it gained, a stance supported by analysis from the Office for Budget Responsibility.
Currently, Chancellor Reeves faces a tough fiscal outlook ahead of the autumn budget. This financial pressure makes any immediate change to the tax-free shopping policy seem unlikely, despite increasing calls for business support.
Why Retailers Are Pushing Back
British retailers contend they are at a disadvantage compared to countries like France and Spain. These nations continue to offer tax-free shopping to non-EU visitors, drawing in high-spending tourists.
Retailers argue that the Treasury’s current assessment overlooks the wider economic benefits. They believe the broader uplift in spending across the visitor economy is not being fully accounted for.
Hundreds of businesses, including prominent names like Mulberry Group Plc, Fortnum & Mason Plc, and John Lewis, signed an open letter to Rachel Reeves last year. They collectively called for the urgent reinstatement of the policy.
The AIR highlights that the UK would become the only European country to offer VAT rebates to 450 million EU consumers if the policy returned. They point to visitor spending figures from last year, showing the UK at 92% of 2019 levels, while Spain reached 106% and France 110%.
- UK retailers are pressing the government to bring back tax-free shopping for tourists.
- They estimate billions in potential new spending from EU and non-EU visitors if the policy is reinstated.
- The policy was scrapped in 2021, with previous government analysis suggesting it cost more than it gained.
- Retailers argue the UK is losing out to European competitors and that the wider economic uplift is being ignored.
The outcome of this renewed lobbying effort remains to be seen as the government shapes its plans for the visitor economy.
UK retailers are renewing their push for the return of tax-free shopping for tourists, arguing it would significantly boost the economy and help them compete with European rivals.
Retailers Unite for Tax-Free Shopping
Leading UK retailers are urging Chancellor of the Exchequer Rachel Reeves to bring back tax-free shopping for international visitors. This comes as the government prepares to outline its strategy for the so-called visitor economy.
The Association of International Retail (AIR) is at the forefront of this campaign. They believe reinstating the VAT exemption is crucial for the sector’s recovery and growth.
The Economic Case for Reinstatement
According to AIR, making purchases exempt from VAT could inject an additional £3.65 billion into the UK economy from EU visitors alone. This is a significant figure, highlighted in their recent submission to ministers.
Beyond the EU, the lobby group estimates the UK has already lost about £1.5 billion in spending from non-EU visitors. This spending, they argue, was diverted away after tax-free shopping was abolished in 2021.
A History of Disagreement
The debate over tax-free shopping has been a long-standing one. Then-Chancellor Rishi Sunak ended the system in 2021, using the UK’s departure from the EU as an opportunity to scrap the 20% VAT sales tax rebate for travelers.
Both Conservative and Labour governments, with the brief exception of Liz Truss’s administration, have largely agreed with Sunak’s view. They maintained that the policy cost the Treasury more than it gained, a stance supported by analysis from the Office for Budget Responsibility.
Currently, Chancellor Reeves faces a tough fiscal outlook ahead of the autumn budget. This financial pressure makes any immediate change to the tax-free shopping policy seem unlikely, despite increasing calls for business support.
Why Retailers Are Pushing Back
British retailers contend they are at a disadvantage compared to countries like France and Spain. These nations continue to offer tax-free shopping to non-EU visitors, drawing in high-spending tourists.
Retailers argue that the Treasury’s current assessment overlooks the wider economic benefits. They believe the broader uplift in spending across the visitor economy is not being fully accounted for.
Hundreds of businesses, including prominent names like Mulberry Group Plc, Fortnum & Mason Plc, and John Lewis, signed an open letter to Rachel Reeves last year. They collectively called for the urgent reinstatement of the policy.
The AIR highlights that the UK would become the only European country to offer VAT rebates to 450 million EU consumers if the policy returned. They point to visitor spending figures from last year, showing the UK at 92% of 2019 levels, while Spain reached 106% and France 110%.
- UK retailers are pressing the government to bring back tax-free shopping for tourists.
- They estimate billions in potential new spending from EU and non-EU visitors if the policy is reinstated.
- The policy was scrapped in 2021, with previous government analysis suggesting it cost more than it gained.
- Retailers argue the UK is losing out to European competitors and that the wider economic uplift is being ignored.
The outcome of this renewed lobbying effort remains to be seen as the government shapes its plans for the visitor economy.
