Over 300 business leaders have signed a letter asking Chancellor Rachel Reeves to reinstate tax-free shopping in the UK, calling the so-called tourist tax a “spectacular own goal” for retail.
The signatories, which include hotelier Sir Rocco Forte, Paul Smith, Heathrow, John Lewis and Shakespeare’s Globe, have said that if Reeves is serious about promoting stronger economic growth, she must reverse the so-called tourist tax.
The policy has been blamed for a slump in luxury selling in the capital, with visitors reportedly travelling to London for a cultural visit and then heading to Paris or Milan to shop.
“This does not just affect a few luxury stores in London’s West End, as some have claimed,” business leaders wrote in the letter to Reeves.
“People are increasingly choosing to shop in Paris, Milan and Berlin rather than here… The entire tourist economy is affected, whether that be regional tourist centres or manufacturers down the supply chain, hotels and restaurants, taxis, galleries and museums, cafes… the list is endless. Every high street is seeing the impact,” they added.
VAT-free shopping, which allowed visitors to claim 20 per cent of their purchase back, was scrapped in 2021 for visitors outside the EU by then-Chancellor Rishi Sunak as part of a post-Brexit consultation.
So far, the UK government has resisted pressure to bring back tax-free shopping. The Treasury has estimated that restoring the policy would cost the exchequer around £2bn.
However, the Centre for Economics and Business Research has concluded the removal of tax-free shopping is deterring two million tourists a year and costing the UK £11.1bn in lost GDP.
Hotelier Sir Rocco Forte
“International tourists, whether it be Middle Eastern or American travellers, are spending less time in London,” Kurt Geiger’s chief executive, Neil Clifford, told The Times in September. “If you go to Milan or Paris or Madrid — my team and I are in those markets often — there’s no doubt they’re busier.
Sir Rocco Forte, chairman of Rocco Forte Hotels, said: ‘Rachel Reeves and Labour have promised to prioritise measures that will promote economic growth above all else and scrapping the tourist tax should be top of the list at the Budget.’
“It would help to increase the number of international tourists who visit London and the United Kingdom, which in turn will provide a much-needed boost to businesses and high streets across the country – while providing billions of pounds to the Treasury each year,” Khan has said.
Other senior business leaders who signed the letter, include Michael Wainwright of Boodles, Sean Doyle of British Airways, Caroline Rush of the British Fashion Council and Paul Jackson of Claridge’s.