Retail bosses call on chancellor to bring back VAT-free shopping for tourists to boost economy

Johen Redman on Unsplash

The Daily Mail has launched a ‘Scrap The Tourist Tax’ campaign to support a group of business leaders who are calling on the government to reinstate VAT-free shopping for overseas visitors.

Sixty-eight retail, hospitality and tourism bosses have signed a letter to the chancellor calling the Treasury’s decision to end the scheme in 2021 “puzzling and ill-timed.” They argue that the cost of the 20 per cent tax refund would be outweighed by the benefits of encouraging more visitors to the country who would help inject “large sums into the broader economy”. The letter warns “the removal of tax-free shopping is turning into an extraordinary own goal for the UK.”

Among the signatories are the British Fashion Council’s Caroline Rush, Johnstons of Elgin CEO Chris Gaffney and fashion designers Sir Paul Smith, Erdem Moralioglu and Anya Hindmarch.

According to research by Oxford Economics, tax-free shopping would boost GDP by £4.1 billion and support 78,000 jobs.

Liz Truss announced the government would reinstate the tax-free tourists scheme last year, but the decision was reversed just weeks later by current chancellor Jeremy Hunt.

The full letter

Dear Chancellor, 

The pandemic placed most businesses under acute pressure, particularly those in the hospitality, retail, travel and tourism sectors which we represent. So, the Treasury’s decision in 2021 to end the longstanding scheme that allowed international tourists to shop tax-free was puzzling and ill-timed.

Liz Truss’s shortlived government announced plans to reintroduce the VAT rebate to boost the high street, but this has now been reversed.

Every country remaining in the EU now offers tax-free shopping, while we don’t. Effectively, we have suddenly started charging 20 per cent more than other countries do for the same goods. The Treasury claims this move is saving the taxpayer £2billion a year, but this is flawed and misleading. The foreign visitors who have traditionally come from the US, Middle East, China and elsewhere to shop for the best of British inject large sums into the broader economy, on top of what they spend on retail purchases.

Figures from Visit Britain show that shopping has traditionally been one of the most popular reasons cited for visiting the UK. Indeed, British business traditionally made £3.5billion in tax-free sales to tourists every year. The scheme benefited tourist hotspots like London, Manchester, and Edinburgh, as well as out of town shopping villages.

Visitors did not just spend in retail stores – their custom supported hotels, restaurants, and theatres. Oxford Economics has concluded that if all the economic impacts of a tax-free shopping scheme are taken into consideration, the UK would, in fact, benefit to the tune of hundreds of millions of pounds a year.

The impact of its removal is already being seen. It was depressing to witness a great British brand like Mulberry closing the doors of one of its flagship stores as a direct result of the loss of tax-free shopping, as it did earlier this year.

New research from tax-free shopping experts Global Blue shows the UK is losing out on the significant spending made by international travellers as global travel resumes. Paris, Madrid and Milan can’t believe their luck as the UK’s lack of tax-free shopping drives travellers to spend in Europe.

Data covering international visitors from the USA, Gulf Cooperation Council (GCC) and south-east Asia regions from a sample of 11 leading retailers shows that whilst the UK has recovered post-pandemic to 64 per cent of

2019 levels of consumer spending, Italy is at 79 per cent, Spain at 84 per cent and France, which is benefiting most from the UK Government’s decision to remove tax-free shopping, has recovered to 108 per cent.

Looking at individual nationalities, the differences become even more pronounced. For USA visitors, the UK is back to 101 per cent of 2019 spend. However, Italy is enjoying spending from US visitors at 190 per cent of 2019 levels. Spain is up to 201 per cent and France is at a staggering 226 per cent.

For GCC visitors, the UK is at only 65 per cent of 2019 levels whilst Spain is already at 158 per cent, Italy at 166 per cent, and France topping out at 198 per cent.

In addition, UK residents are starting to take advantage of tax-free shopping in Europe, with £450million disappearing from high streets.

It is clear that the removal of tax-free shopping is turning into an extraordinary own goal for the UK.

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.

We call on you to think again.

Yours sincerely

  • Sir Rocco Forte, Chairman, Rocco Forte Hotels
  • Sean Doyle, CEO and Chairman, British Airways
  • Thierry Andretta, CEO, Mulberry
  • Neil Clifford, CEO, Kurt Geiger
  • Caroline Rush, CEO, British Fashion Council
  • Alex Beard, CEO, Royal Opera House
  • Anya Hindmarch, Founder and Creative Director, Anya Hindmarch
  • Fraser Brown, Retail Director, Heathrow Airport 
  • Sir Paul Smith, Designer, Paul Smith
  • Tom Athron, CEO, Fortnum & Mason
  • Jonathan Akeroyd, CEO, Burberry
  • Helen Brocklebank, CEO, Walpole
  • Hannah Colman, CEO, Jimmy Choo
  • Christopher Cowdray, CEO, Dorchester Collection
  • Dee Corsi, CEO, New West End Company
  • Paul Barnes, CEO, Association of International Retail
  • Gianfilippo Testa, CEO, Alexander McQueen
  • Paul Jackson, General Manager, Claridge’s
  • Manju Malhotra, CEO, Harvey Nichols
  • John Durnin, Business Director, Bicester Village
  • Knut Wylde, General Manager, The Berkeley
  • Eric Heerema, Chairman and CEO, Nyetimber
  • Kiki McDonough, Founder and Creative Director, Kiki McDonough
  • Sandeep Bhalla, General Manager, The Connaught
  • Theo Fennell, Founder, Theo Fennell
  • Andrew Stembridge, Executive Director, Iconic Luxury Hotels
  • Franck X Arnold, Regional Vice President and Managing Director, The Savoy London
  • Christian Bachler, Executive Vice President, Wedgwood
  • Guillaume Marly, Managing Director, Hotel Café Royal
  • Andrew Henning, General Manager, Grosvenor House Suites
  • Antony Lindsay, CEO, Fabergé
  • Thomas Kochs, Managing Director, Corinthia London
  • Michael Wainwright, Managing Director, Boodles
  • Philipp and Mark Mosimann, Mosimann’s Private Dining Club
  • Michael Bonsor, Managing Director, Rosewood London
  • Claire German, CEO, Design Centre Chelsea Harbour
  • Julia Carrick, CEO, Julia Carrick Luxury
  • Hugh Seaborn, CVO and CEO, Cadogan
  • Joanne Rees, Managing Director, Elizabeth Gage
  • Trevor Pickett, CEO, Pickett
  • Brian Duffy, CEO, Watches of Switzerland Group 
  • Pamela Harper, Chairman and CEO,
  • Halcyon Days and The Caverswall China Company
  • Giles English, Co-Founder, Bremont Watch Company
  • Chris Roberts, Managing Director, Como Holdings
  • Sophia Hirsh, Managing Director, Hirsh London
  • Nicholas Bond, Owner and Director, Franchetti Bond
  • George Somlo, Director, Somlo Antiques London
  • Adil Mehboob-Khan, CEO, Liberty London
  • Luca Donnini, CEO, Temperley London
  • Derrick Hardman, Managing Director, Global Blue (UK)
  • David Edwards, Managing Director, Seiko UK
  • Robert Ettinger, CEO, Ettinger London
  • Charlie Pragnell, Managing Director, Pragnell
  • Annoushka Ducas, Founder and Creative Director, Annoushka Jewellery
  • Erdem Moralioglu, Designer and Philippa Nixon, CEO, Erdem
  • Sean Gilbertson, CEO, Gemfields
  • Adrian Maronneau, Managing Director, Bucherer UK
  • Nicholas Brooke, CEO, Sunspel Limited
  • Simon Cundey, Managing Director, Henry Poole
  • Martin Mason, Managing Director, Tricker’s
  • Sacha Rose, CEO, Derek Rose Ltd
  • Charlie Holland, CEO, Gusbourne Fine English Wines
  • Julian Moore, Managing Director, DR Harris
  • Hilary Freeman, Managing Director, Edward Green
  • Jamie Gill, Executive Director, Roksanda
  • Chris Gaffney, CEO, Johnstons of Elgin
  • Steven Medway, Chief Executive, Knightsbridge Partnership and King’s Road Partnership
  • Baton Berisha, CEO, The Wolseley Hospitality Group