Rishi Sunak has been urged to scrap the “tourist tax” as part of an attempt to turbocharge the UK economy. A coalition of business leaders penned an open letter to the Prime Minister, calling for the return of tax-free shopping for overseas tourists in the UK. In 2021, the Government scrapped the VAT refund for tourists.
While former PM Liz Truss tried to reintroduce the VAT rebate during her time in No10, Chancellor Jeremy Hunt reversed the decision last autumn.
The move has been described by the business leaders as an “extraordinary own goal”, urging Mr Sunak to axe the levy for tourists.
They said that reinstating the refund would bring a multi-billion-pound boost to the UK economy.
Research by Oxford Economics said the move would boost the UK economy by up to £4.1billion and support 78,000 jobs.
The Treasury has claimed that it would cost £2billion to remove the tax, but the experts have estimated that the Exchequer would see a net gain of at least £350million per year.
British Airways and Fortnum and Mason are among the signatories of the letter, which argued that the cost of the 20 percent VAT rebate would be outweighed by the benefits of encouraging more tourists into Britain.
It accused the Treasury of “flawed and misleading” logic.
The letter saw business leaders argue that “every country remaining in the EU now offers tax-free shopping, while we don’t”.
It explained: “Effectively, we have suddenly started charging 20 percent more than other countries do for the same goods.
“The Treasury claims this move is saving the taxpayer £2billion a year, but this is flawed and misleading.
“The foreign visitors who have traditionally come from the US, Middle East, China and elsewhere to shop for the best of British inject large sums into the broader economy, on top of what they spend on retail purchases.”
The coalition of business leaders added in their letter: “It is clear that the removal of tax-free shopping is turning into an extraordinary own goal for the UK.
“We understand that there are pressures on the public finances at the present time. But the evidence shows that reinstating tax-free shopping would be a win for both business and the taxpayer.”
Sir Rocco Forte, who organised the letter to Mr Hunt, told the Daily Mail that reinstating tax-free shopping would stimulate growth and be an “easy win” for ministers.
He added: “Jeremy Hunt blithely talks about growth, and is doing nothing to help growth at the present time.
“This would help growth significantly and it certainly has no impact on inflation.
“There is no reason not to do it.”