A campaigning group for businesses in London is urging the government to reinstate VAT rebates for shoppers visiting the capital.
BusinessLDN has submitted a report to the Treasury arguing that scrapping the so called tourist tax would generate £4.1 billion annually for the UK economy as a whole and create an additional 78,000 jobs, according to data from Oxford Economics.
Visitors to the UK have been unable to reclaim VAT as they leave the country since January 2022, prompting tourists to redirect their spending to continental Europe where Paris, Milan and Madrid have been the big winners.
Figures from Global Blue show that 10% of UK spending by international shoppers in 2019 has now moved to EU countries, which have kept VAT-free shopping.
Click to download the BusinessLDN submission to the Treasury.
“The tourist tax is an economic own goal,” says John Dickie, CEO at BusinessLDN.
“Re-introducing the VAT reclaim scheme would boost UK’s flatlining economy through increased spending from international visitors in our shops, restaurants, hotels and more. And thanks to spending that can’t be reclaimed, the increase in spend would also deliver a net boost of £350 million in tax revenues for the Exchequer every year. This is a win-win for the economy, public finances and the country. We need to act now to show the world that Britain is open for business.”
Mayor of London, Sadiq Khan, agrees.
“I have long been calling for the Government to restore tax-free shopping for international visitors. 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. It is a quick way for the Government to grow the economy and support sectors that have suffered disproportionately from the pandemic and the current cost-of-living crisis,” he says.
It is not just the directly affected retail sector that believes it is losing out from the tourist tax, fewer tourists affects businesses across the economy, with London most affected.
The retail, tourism and leisure sectors make a significant contribution to London’s economy and employment.
Retail accounts for 663,000 jobs, accommodation & food some 450,000 jobs and the arts, entertainment & recreation sector has a further 223,000 jobs. Taken together, that’s over 20% of all employment in London that lobbyists believe could be helped by scrapping the tourist tax.
