VAT rebates will not come back under Chancellor’s stabilisation plan

The Chancellor giveth, the Chancellor taketh away.

A month after Kwasi Kwarteng said he would bring back VAT rebates for overseas visitors, his successor, Jeremy Hunt has cancelled the measure.

Mr Hunt says that allowing 20% VAT to be reclaimed at the airport on departure would cost the Treasury £2 billion per year.

The figure is strongly contested by retailers, particularly at the luxury end of the market, who believe big spending tourists contribute around £5 billion to the economy.

Retailers like Watches of Switzerland were involved in lobbying back in 2020 when Rishi Sunak axed instant VAT rebates when he was chancellor.

Following the mini budget by Mr Kwarteng, which has now been torn up by Mr Hunt, the pound slumped to 1.05 to the dollar, making goods dramatically cheaper in this country.

WATCHPRO calculated that a combination of the weaker pound to the dollar, and the return of instant VAT rebates, would have made luxury goods like Rolex watches more than 30% cheaper to visitors from America and other countries with currencies pegged to the dollar, notably oil-rich Gulf States.

The pound is now back at 1.13 to the dollar.

Running the same calculation for the prices of Rolex watches at the current exchange rate with with the VAT rebate scrapped, the difference in prices on both sides of the Atlantic is now down to 11%.