Heathrow Airport (LHR) has joined forced with the British Chambers of Commerce (BCC) and the Federation of Small Businesses (FSB) to launch a new campaign calling on the Chancellor of the Exchequer Jeremy Hunt to ‘provide a £1.5 billion boost to the economy’ with tax free shopping for tourists.

Senior executives from the three organisations, along with other prominent UK business leaders, gathered on Tuesday (5 February) at Heathrow’s Terminal 5 for a roundtable discussion and to reignite calls for a new internationally competitive tax free shopping scheme to be introduced.

With the Spring Budget taking place on 6 March, it’s hoped that this latest campaign push will help to put the issue firmly on the radar by further demonstrating the potential merits of such a scheme.

Campaigning activity around the policy has been gathering pace in recent months, with the Office for Budget Responsibility (OBR) committing in December 2023 to reviewing the original costing of the decision to end tax free shopping schemes in 2020.

OBR is currency undertaking its analysis with an aim of publishing its conclusions alongside the Spring Budget.

Loss to British retail sector estimated at over £1.5bn a year 

Among those in attendance attendance at Tuesday’s Heathrow gathering were BCC’s Director General Shevaun Haviland, Craig Beaumont, Chief of External Affairs, FBS and Paul Barnes, CEO of Association of International Retail (AIR).

The meeting was chaired by Dale Reeson, Director of Operations at Heathrow.

AIR estimates that culling the scheme has led to a loss to the British retail sector at over £1.5bn a year. As a result, those present argued that the Treasury ‘could no longer dispute forecasts on the policy change’.

“It was great to be at Heathrow today to hear how a new internationally competitive tax-free shopping scheme would turbocharge Britain’s economy, helping retailers and hospitality venues across the country,” said Shevaun Haviland, Director-General of the BCC.

“The Chancellor in his Spring Budget has the chance to firmly show that Britain is open for business, he must seize it.”

UK’s appeal as a shopping destination ‘overshadowed’

Heathrow’s Retail Director Fraser Brown has long been a vocal supporter of the campaign, stressing that the UK is losing out on vital retail revenues with tourists attracted to European cities such as Paris and Milan to benefit from tax-free shopping incentives in place.

Retail spend at Heathrow declined by 37% (in real terms) during the first nine months of 2023, compared to the same period in 2019.

Commenting on the roundtable event, Reeson said: “We were delighted to be joined by the BCC and FSB today at Heathrow, coming together on the campaign to scrap the tourist tax, to level the playing field for British businesses.

“The UK’s international competitiveness is at stake as tourist spend in the UK is being overshadowed by other European countries, where goods are up to 20% cheaper.

“We must see policy change at the Spring Budget, which would benefit every town and city across Britain.”

New CEBR report estimates billions in lost GDP

More data in support of reinstating a tax free shopping scheme for international visitors to the UK (which would allow international visitors to the UK to reclaim the VAT paid on eligible purchases while in the UK) comes in a report commissioned by ChangeGroup, which was sent to the Chancellor on 1 February.

The Centre for Economics and Business Research (CEBR) report, titled, Tax-free shopping and tourism – Q3 2023, forecasts that the absence of a fully operational and full utilised VAT retail export scheme for international tourists has resulted in ‘£11.1 billion in lost GDP’ last year and is ‘deterring around two million visitors’.

Furthermore, CEBR has calculated that, considering the boost in tax receipts the scheme is expected to stimulate, ‘netting off the value of the rebate provided to those utilising the scheme still produces a net fiscal gain of £2.5 billion’.

“Q3’s data showed that 2023’s summer tourism season was the strongest for a number of year, albeit still falling short of pre-pandemic levels of activity,” said Sam Miley, Managing Economist, CEBR.

“Our analysis suggests that the operation of a tax free shopping scheme would have helped to close this gap, by encouraging greater visitor numbers and expenditure and producing impacts on the retail supply chain.

“Furthermore, the boost to public finance that could result from the scheme should be of interest to policymakers as the Chancellor prepares of the upcoming Spring Budget.”

“Getting rid of the tourist tax would actually save the government money,” added Sacha Zackariya, CEO of ChangeGroup and Prosegur Change.

“I really hope they reintroduce the same system they had before – and which is in place in Paris, Milan and Madrid – and which can be re-implemented quickly before this summer’s Olympics in Paris.”

UK Travel Retail Forum ‘will continue to make the case to the Treasury’

On the latest developments, Nigel Keal, Chair of the UK Travel Retail Forum, commented: “Reports of a review of tax free by the OBR is a welcome step. UKTRF hopes this sets the stage for the return of both airside and high-street tax free shopping, which will provide a major boost for the travel and travel retail sector and make the UK a more attractive destination to international visitors.

“UKTRF will continue to make the case to the Treasury for the return of an airside tax free sales scheme for all passengers departing the UK, which our industry is ready to implement immediately.

“The UK is the only advanced economy without such a scheme in place, which has proved hugely damaging to our international competitiveness.

“We continue to urge the Government, not only to bring back tax free shopping in this Budget, but to go a step further and consider the introduction of arrivals duty free, as a further measure to boost the UK travel and tourism sector.”

READ MORE: Tax free shopping cull leaves UK Treasury ‘£200 million worse off’

READ MORE: Tax free ‘could inject £10bn into UK economy’

READ MORE: Committee report scathing of UK’s tax free U-turn