LHR welcomes UK Parliament debate on ‘tourist tax’

By Simon Warburton and Luke Barras-hill |

Heathrow has welcomed the VAT debate. Image source: Heathrow Airport.

A scheduled parliamentary debate on tax free shopping for international visitors aimed at persuading the UK government to jettison the so-called ‘tourist tax’ is being lauded by Heathrow Airport (LHR).

Whitehall’s decision to cull virtually all forms of tax free shopping in the wake of Brexit, including at airports and downtown, has scaled the political ladder in recent months following criticism from a volley of high-profile luxury goods companies, including Mulberry, Burberry and Harvey Nichols.

British tabloid newspaper the The Daily Mail’s concerted ‘Scrap the Tourist Tax’ campaign has also afforded the issue a degree of high-profile publicity.

This has received backing from cross-party MPs and reportedly hundreds of retail stakeholders, concerned that the government’s decision is driving potential shoppers to countries such as France and Italy to purchase high-value goods rather than luring visitors across the English Channel.

A long-running stalemate over the issue could now turn when a 90-minute Westminster Hall debate sits on 7 September after Parliament returns from its recess.

The Treasury will hear and respond to representations on restoring the tax perk to allow travellers to reclaim 20% VAT on goods purchased.

Tourist tax “pushes money through tills in Paris and Milan”

London’s loss is Paris’ gain.

LHR has enthusiastically backed the debate, citing the “damage” that the withdrawal of the extra-statutory concession on airside purchases (excluding liquor & tobacco) has caused and insisting it ought not to have been culled in the first place after the Brexit transition period.

A Heathrow spokesperson told TR Business: “We welcome the chance for lawmakers to debate the need to bring back tax free shopping. The government should never have introduced this tourist tax, which has only made the UK less competitive and continues to push more money through the tills in Paris and Milan.

“This will be an important opportunity for the government to understand the damage this tourist tax is doing across the country and to the UK’s once world-leading retailer offering.”

Others are more cautious. A TRBusiness source with knowledge of the matter said they expect the debate to be little more than a kite-flying exercise for the Treasury to reinforce its stated position, though the source nonetheless acknowledged the debate as a “useful channel” for keeping the issue firmly within the public gaze.

A HM Treasury spokesperson told TRBusiness: “VAT-free shopping does not directly benefit Brits – it lets foreign tourists who buy items in the UK to claim back VAT as they return home. The scheme could cost British taxpayers around £2 billion a year at a time when we’ve already had to take difficult decisions to get debt falling and fewer than one in ten non-EU visitors used the previous scheme, showing it’s not a significant attraction for tourists.”

That argument is countered by those pointing to a net gain to the economy, as more visitors could potentially be attracted to British shores to spend on high-value goods.

Modelling by Oxford Economics suggests additional foreign visitor spending will deliver a £4.1 billion boost to UK GDP, sustaining more than 78,000 jobs, while attracting more than 1.6m more visitors to the UK in 2025/2026 who otherwise would not travel.

In comments offered to TRBusiness during last month’s TR Consumer Forum [prior to the Westminster Hall debate being announced – Ed], where he appeared as a keynote speaker, Heathrow Retail Director Fraser Brown accused the government of “an act of economic vandalism” in culling tax free shopping and a “very, very dangerous thing to have done”.

“We are incredibly angry about it, and will continue to fight hard […] for a change in government policy,” he explained.

The possibility of a restoration of the VAT Retail Export Scheme and Extra Statutory Concession (ESC) on airside sales was floated during the extraordinarily short administration of Prime Minister Liz Truss in the autumn of 2022, when plans to introduce a digital tax free shopping mechanism for international visitors were announced.

The move was part of former Chancellor Kwasi Kwarteng’s package of tax reforms and was seen as a massive fillip for the travel retail industry after consistent lobbying.

However, the notion was shortlived as Jeremy’s Hunt swiftly reversed the plan when he took over as Chancellor.

Rallying after recess to put forward VAT-free case

The Parliamentary debate, titled: ‘Tax Free Shopping for International Visitors’ will be opened by Conservative MP Sir Geoffrey Clifton-Brown who said: “I am [pleased] to be able to secure this important Parliamentary debate with the support of a significant number of cross-party MPs. It is really important this subject is thoroughly debated in Parliament, which will hopefully send a strong message to the Chancellor ahead of the autumn statement.”

Tax free

Administering a tax free shopping scheme would amount to £2 billion per year in lost tax revenues, maintains the Treasury.

For her part, Association of International Retail (AIR) Chairwoman and New West End Company CEO Dee Corsi added: “We thank Geoffrey Clifton-Brown, who has led this campaign in Parliament and secured this debate.

“We now have the opportunity to highlight the impact of the ‘tourist tax’ on the British economy, and to discuss the benefits of restoring it. We cannot mitigate the damage already done by this ‘tourist tax,’ but we can still avert long-term, damaging changes in shopper behaviour.”

Approached by TRBusiness, UK Travel Retail Forum (UKTRF) said it would comment after the Parliamentary debate on 7 September.

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