Parliamentary committee says end to VAT-free tourist shopping a mistake

By

Sandra Halliday

Published
Oct 25, 2022

Retailers may have been aghast when the reversal of the cancellation of VAT-free shopping for tourists was itself reversed, but it seems they have some heavyweight support in Parliament. The cross-party Digital, Culture, Media and Sport (DCMS) Committee of MPs has called the decision to re-cancel the shopping perk “short-sighted and incredibly damaging”.

The committee believes the decision will harm inbound tourism and said the Government is failing to recognise its value, with it providing 3.2 million jobs and accounting for as much as 9% of GDP.

It said the lack of analysis around the decision-making led to “a spectacular own goal” by ministers and that the UK can’t simply rely on its tourist hotspot reputation to encourage high-spending visitors to come here.

It also said that the “inbound tourist sector is too reliant on London and that there is a ‘worrying’ lack of money for marketing”.

Paul Barnes, Chief Executive of the Association of International Retail, who gave evidence to the committee, said: “We welcome the report and strongly support the recommendations it provides on the vital role of the retail, hospitality and inbound tourism industries in growing the UK economy.

“The report highlights serious failings in Government policy, particularly regarding the withdrawal of tax-free shopping. The recommendation that the Government publish an assessment of the direct and indirect impact of withdrawing from the scheme is essential if we are to do what is right for the UK economy.

“We will be urging the Chancellor to seek an independent assessment of the impact of ending tax-free shopping from the Office for Budget Responsibility, so that any future decision can be made on full and accurate information.”

And Dee Corsi, Interim CEO of New West End Company added: “The West End generated nearly £2 billion in tax-free sales in 2019. The scheme encouraged high-spending international visitors to the UK to spend over £28 billion in our shops, hotels, restaurants and other attractions.

“Now that Britain has become the only European country not to offer tax-free shopping, we are already seeing much of that spending diverting to other destinations. Money that used to be spent in London is now being spent in Paris and Milan.

“When we left the EU we had the chance to become the world's number one destination of choice for international shopping.  This would have helped our retail, hospitality and tourism businesses, created jobs, increased tax revenues and encouraged investment. Instead we are struggling to compete as our European neighbours benefit from the Government's decision to end tax-free shopping in the UK.”