The UK Government did not move to reinstate tax free shopping for international visitors in today’s Autumn Statement, however, Chancellor Jeremy Hunt said it will look again at evidence submitted on the impact of ending the scheme.
The Autumn Statement was driven by a goal to stimulate long-term economic growth, with announcements including 110 growth measures for British businesses.
Point ‘5.87 VAT Retail Export Scheme’ of the full statement reads: ‘The government is grateful for industry submissions on the VAT Retail Export Scheme and the associated airside scheme (tax free shopping).
‘The government will continue to accept representations and consider this new information carefully, alongside broader data.’
Hunt said: “We want to do everything possible to make our tourism and our retail industry competitive and we want to encourage international visitors.
“When we changed policy on this particular issue a year ago it was because the cost of it was around £2.5 billion a year and we didn’t think we could afford to continue doing it. But we are looking again at the numbers in the light of the most recent data and we can see what has happened to comparative shops in Paris and Milan, and we will review that and see if it is still as expensive, and I hope it isn’t.”
Key duty free and travel retail stakeholders have been taking to social media to share their views.
“It is welcome news that the Chancellor is looking again at the numbers in light of new data which clearly shows that the UK is losing out to the likes of Paris and Milan, without a proper tax free shopping incentive in place,” said Heathrow Retail Director Fraser Brown, in a statement also released to TRBusiness.
“The UK’s international competitiveness is on the line as tourist spend in the UK continues to be eclipsed by our European neighbours, where goods are up to 20% cheaper.
“However, today marked yet another missed opportunity to stop this export of sales abroad, and to level the playing field for British businesses. There can be no more delay, the Chancellor must act by the Spring Budget and remove this tourist tax.”
Nigel Keal, Chair of the UK Travel Retail Forum, added: “The Chancellor has promised to ‘get Britain growing’ in his Autumn Statement. The UK Travel Retail Forum believes that the return of tax free shopping for international travellers, and the introduction of arrivals duty free stores at airports, ports and international rail stations, will do just that.
“Both arrivals duty free and VAT free shopping will provide a welcome boost to the travel and travel retail sector, at the same time making the UK a more attractive destination to international visitors.
“UKTRF is working hard to make the case for both policies to ministers. We note the Government’s commitment in the Autumn Statement to accepting representations on tax free shopping and look forward to continuing our positive dialogue with Treasury on both issues.”
A London Gatwick spokesperson echoed the sentiment.
“We welcome the Chancellor using the Autumn Statement to make full capital expensing a permanent feature of the UK tax system,” said the spokesperson.
“This will drive growth by boosting business investment and help accelerate industry’s transition towards net zero.
“It is however a missed opportunity that the Chancellor has not reintroduced tax free shopping for international visitors. This would have allowed the UK to compete more effectively with our European counterparts, supported retail, hospitality and tourism jobs, and added economic value for airport communities and UK plc.
“We urge the Treasury to commission an independent and comprehensive review of this policy ahead of the Spring Budget.”
A volley of high-profile luxury goods companies and leading retail stakeholders, backed by cross-party MPs, have been making the case for a reversal of the decision to cull virtually all forms of tax free shopping in the wake of Brexit.
The campaign reached a crescendo with a Parliamentary debate held in September, at which All-Party Parliamentary Group for The Future of Aviation Chairman MP Henry Smith stated that, in his view, the introduction of such a regime would be “at worst” cost-neutral to the UK’s HM Treasury.
The MP went further and maintained that increases in corporation and income tax would result in an additional £50 million each year to the Exchequer.
Further to this, Paul Barnes, CEO of the Association of International Retail, recently told a Culture, Media and Sport committee, in a hearing, that the UK Treasury has directly lost £200 million since the UK’s tax free shopping programme was culled on 1 January 2021.
In addition to the £200m the Treasury has directly missed out on, Barnes calculated that UK retailers have lost £1.5 billion in spend as tourists opt to shop in other countries.