Business leaders are piling fresh pressure on the government to scrap its controversial tourist tax as data shows it is eating away at the UK’s GDP and banishing international visitors.
FTSE 100 bosses, including Stuart Machin, the chief of M&S and Paul Marchant the boss of Primark are among the now 420 signatories writing to the Chancellor urging him to reintroduce the VAT scheme.
In the letter, retail bigwigs urged Jeremy Hunt to “think again” ahead of the March Budget.
“It is clear that the removal of tax-free shopping is turning into an extraordinary own- goal for the UK,” an excerpt read.
“We understand that there are pressures on the public finances at the present time. But the evidence shows that reinstating tax-free shopping would be a win for both business and the taxpayer.”
Analysis published today by Centre for Economics and Business Research showed the removal of VAT free shopping for tourists is deterring two million foreign visitors from coming to the UK and costing the economy £11.1bn in lost GDP.
Government ditched the VAT refund for tourists in 2021, when Prime Minister Rishi Sunak was chancellor – a move that has since been dubbed ‘tourist tax’.
The policy was debated in parliament last September however there has been no legislation placed to bring the tax break back.
In the Autumn Statement, Jeremy Hunt also promised to “look again at the numbers” and indicated that he hoped that restoring tax-free shopping would prove affordable.
Data released by the Office for National Statistics show 10.9 million overseas residents visited the UK in the third quarter of 2023, which included the crucial summer season.
This was up 9.3 per cent year on year but down by over a million when compared to pre-pandemic levels.
Sam Miley, managing economist at Centre for Economics and Business Research, said: “Our analysis suggests that the operation of a tax-free shopping scheme would have helped to close this gap, by encouraging greater visitor numbers and expenditure and producing impacts down the retail supply chain.
“Furthermore, the boost to public finances that could result from the scheme should be of interest to policymakers, particularly as the Chancellor prepares for the upcoming Spring Budget.”
City A.M has contacted the Treasury for a comment.