Bosses including the chief of Marks and Spencer and the head of British Airways have reacted with fury this afternoon following the Chancellor’s decision to snub calls for the end of the tourist tax.
Delivering the Spring Budget this afternoon Jeremy Hunt hinted at no plans to bring back the scheme which gives international shoppers a 20 per cent VAT refund.
Ahead of the speech, over 500 business leaders, backed by the British Chambers of Commerce and the Federation for Small Businesses, had written to Hunt asking him to reinstate tax-free shopping for tourists.
Sir Rocco Forte, chairman of Rocco Forte Hotels, and a signatory said: ‘‘It is quite staggering that the Prime Minister and the Chancellor have ignored the pleas of over 500 leading businesses representing the retail, hospitality, tourism and arts sectors and refused to scrap the tourist tax.
“The case for reintroducing tax-free shopping in the UK is clear and overwhelming. As things stand, every country in the EU offers sales tax rebates to tourists while we don’t, meaning the whole tourist economy in the UK is operating with one hand tied behind its back.”
The Chancellor promised at the autumn statement to ‘look again at the numbers’ and indicated that he hoped that restoring tax-free shopping would prove affordable.
A flurry of reports have come out in the past year highlighting how the UK economy has been at a disadvantage since Sunak scrapped the measure that gave international shoppers a 20 per cent VAT refund.
Last week, a bruising study by the Association of International Retail showed 63 per cent of international tourists would be more likely to make large purchases in the UK if tax-free shopping was re-introduced.
Adding to the misery, a number of Britain’s top designers and fashion houses have shared how the absence of the scheme has led to them losing profits.
Speaking after a disappointing set of Golden Quarter results, the chief of Mulberry, Thierry Andretta, said: “In the UK, we continue to believe the lack of VAT-free shopping is impacting the retail landscape, as well as the hospitality, leisure and tourism sectors.”
The policy was debated in parliament last September however there has been no legislation placed to bring the tax break back.
It will be another blow for retailers who are already feeling the pinch from customers scaling back spending.
City A.M has contacted the Treasury for a comment.