Move to end VAT-free shopping for tourists 'needs more scrutiny'
Fresh scrutiny of a “short-sighted” decision to remove a key tourist tax break that threatens to deliver a further blow to struggling retailers is needed, a senior MP has warned.
Mel Stride, chairman of the Treasury select committee, has called for an independent evaluation of the impact of the scrapping of the Retail Export Scheme from January, which allows non-EU tourists to claim VAT refunds on purchases made in the UK.
The Treasury estimates that the decision - rather than extending the tax break to EU citizens following the end of transition - will add £460m to the public coffers by 2025 under an assessment published this week.
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Industry figures suggest 16m non-EU shoppers visit the UK every year but the Treasury’s estimates suggest visitor numbers will fall by just 30,000 and take no account of the knock-on effect on other sectors such as hospitality.
Mr Stride said: “No estimate of the effects on the wider tourism and leisure sectors has been provided. These sectors will be worried that up to 30,000 tourists, many of whom are high spending, could be dissuaded from visiting the UK.
“The Government should now commission an independent evaluation of the effects of the measure and publish it.”
The Office for Budget Responsibility has said the savings estimates are “highly uncertain” due to factors such as a lack of HMRC data on VAT-free shopping and the impact of the pandemic on air travel.
Sadiq Khan, the London mayor, said that the Treasury move was “extremely short-sighted and, in reality, a false economy”.
He told the Evening Standard: “Deterring tourists from coming to Britain will not only cost the Treasury massively in taxes, but thousands of jobs will be lost and economic recovery could be thwarted.”
Paul Barnes, chief executive of the Association of International Retail, said: “There is every chance that the £400, they think they will be making will be more than wiped out ... the moment you take away tax free shopping they will go to France or Germany.”
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