Government could make ‘tourism tax’ U-turn following review

5th February 2024 | Jack Oliver

Tax-free shopping for tourists could be reinstated with the Office for Budget Responsibility (OBR) set to reassess the Government’s decision to abandon the scheme.

VAT-free shopping for tourists was abolished in 2020 by the then-chancellor Rishi Sunak.

Now, the OBR will look at the potential benefits and drawbacks of reintroducing the scheme, with its findings set to be released next month along with the Spring Budget.

The UK is currently the only country in Europe which does not offer tax-free shopping for international visitors.

Since its abolition, a number of figures from various sectors, including retail, have been critical of the Government’s decision. Speaking at a parliamentary debate in September, Conservative MP and leader of the Scrap the Tourist Tax campaign Sir Geoffrey Clifton-Brown said that London’s retail and hospitality businesses have been abandoned by tourists in favour of mainland European destinations.

He added that the UK was missing out on a £1bn ‘Brexit boost’, as tourists opt for other destinations.

The so-called ‘tourist tax’ has had a greater impact on businesses in the West End than the cost-of-living crisis, according to a New West End Company (NWEC) study.

The group found that 92% of surveyed businesses said they have been affected by the loss of VAT-free shopping, in comparison to 58% who said they had been impacted by the cost-of-living crisis.

Of those who said they had been affected by the ‘tourist tax’, 72% reported a decline in visitor numbers whilst 89% said that they had seen a fall in spending from international visitors.

The survey found that West End businesses are now reconsidering whether to invest in the UK, with 21% considering UK closures or moves to other countries.

The boss of Mulberry is another figure who has been vocal about the ‘tourist tax’, and the luxury brand left its Bond Street store in February 2023, slamming the lack of VAT-free shopping for tourists as well as high business rates and rents as reasons for its departure.


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