- The amount can be conservative because it does not include spending on tourism companies
A controversial ‘tourist tax’ will cost UK shops up to a quarter of a billion pounds in lost sales this Christmas, according to analysis yesterday.
This huge figure increases pressure on Chancellor Jeremy Hunt to cancel this measure in the spring budget.
The study by industry group UKinbound found that the amount may be a conservative estimate because it does not include spending at hotels or other businesses that rely on tourism, such as taxi companies.
Historically, 17.2 per cent of retail spending by foreigners visiting Britain occurs in November and December. When the study extrapolated this against an estimated £1.5bn in annual sales lost due to the tax, it found that stores would lose up to £259m this festive season.
Critics said last night it was further evidence that the failure to restore VAT-free shopping for foreigners was hurting the economy, as tourists leave Britain for other countries that still have the advantage.
Hunt chose not to restore it in his autumn statement last month despite tourism and business chiefs saying it would give a major boost to British businesses.
Yesterday, UKinbound chief executive Joss Croft led calls for it to be returned to the Budget on 6 March.
He added: “These forecasts expose the reality of the decision not to reintroduce VAT-free shopping to international visitors, with economies across the country potentially taking a hit of up to £259 million, as international visitors take their money to other parts of Europe.” He said.
“In addition to the loss of retail spend, the loss of spending is hitting the hotel, hospitality and tourist attractions industries and preventing the domestic tourism industry from playing its full role in growing the UK economy.
“With Christmas being a key season, this unnecessary tax continues to impact international visitors’ holiday choices and continues to negatively impact businesses across the UK.
“The UK has the opportunity to become the shopping capital of Europe and the Chancellor must act now and reintroduce VAT-free shopping to international visitors.”
Conservative MP Henry Smith, chair of the cross-party Future of Aviation MPs group, said: “This not only impacts our aviation, travel and retail industries, but it hurts manufacturing and businesses.”
“It is time for the government to accept the need to reintroduce VAT-free shopping without any further delay.”
Before 2021, non-EU tourists can claim a refund of the VAT charged on their shopping, effectively giving them a 20 per cent discount.
But Rishi Sunak scrapped this when he was Chancellor. Because the tax-free regime remains in place in the EU, tourists could save thousands on handbags and designer clothes if they bought them in Paris or Milan, with the decline in travel having a wider impact on the UK economy.
Hundreds of MPs, peers and prominent figures from across the retail, hospitality and tourism sectors have already backed the Daily Mail’s campaign to scrap the tourism tax.
A study suggests that restoring this advantage could leave the UK £10 billion a year better off and support 200,000 jobs.