by The Chancellor dealt a major blow to the West End today when he decided not to bring back VAT-free shopping for overseas tourists to the UK.
Furious retail and tourism chiefs said Jeremy Hunt’s refusal to bring back the pint was “outrageous” and would leave London hopelessly uncompetitive against city rivals such as Paris and Milan.
Last month Mr Hunt asked the independent Office for Budget Responsibility (OBR) to review the policy – officially known as the VAT Retail Export Scheme – head of his Budget.
But today the OBR concluded that its 2020 estimates, before the scheme was scrapped in 2021, were “still reasonably plausible” despite vigorous lobbying from business leaders.
It estimates that the restoration of VAT-free shopping will cost almost £1.5 billion in lost revenue in the current year and the next two years.
Today’s OBR review says the scheme – widely known as the tourist tax – “was largely linked to spending in a relatively small number of luxury shops, such as those located in central London and Bicester Village.”
Today’s Budget document said the Treasury was “thankful to the OBR for their review of the basic cost of ending duty free shopping.”
He added: “The government will consider these findings alongside industry representations and wider data, and welcomes any further submissions in response to the OBR findings,”
Sir Rocco Forte, chairman of Rocco Forte Hotels, said: “It is very strange that the Prime Minister and Chancellor have ignored the pleas of over 500 leading businesses representing the retail, hospitality, tourism sectors and arts and that they refused to end tourism. tax.
‘The case for reintroducing tax free shopping in the UK is clear and overwhelming. As things currently stand, every country in the EU offers sales tax rebates to tourists but we do not, meaning that the entire UK tourism economy is operating with one hand behind its back.
“Independent economic analysis shows that scrapping the tourist tax would pay off more in terms of stimulated tourism spending in hotels, restaurants, tourist attractions, taxis and the like, with an increase of £11 billion on GDP.
“Reinstating tax-free shopping would be a major Brexit opportunity as the UK would be able to offer savings to a new market of 500 million EU consumers, thanks to our place outside the EU.
“This is a great goal for UK plc. We will now have to persuade Labor as the likely incoming government that reform is a prerequisite for stronger economic growth.’
Andrew Hinds, chairman of F Hinds the jewellers, said: ‘It is extremely disappointing that the Chancellor has taken no action in the Budget to end the tourist tax.
‘The message from business people could not be clearer that this move is urgently needed to start economic growth. This goes far beyond a few luxury retailers in London’s West End – we are seeing the impact of the end of duty free shopping in our 127 high street stores across the country.
‘At a time when we should be doing everything we can to boost the economy, it makes no sense to send a message that the UK is closed for business when it comes to tourism spending.’
Anda Rowland, vice-chairman of the King’s tailors, Anderson & Sheppard, said the Chancellor’s failure to restore duty-free shopping was a ‘bitter blow to British business’.
“Small British businesses are really suffering because of the fact that international visitors are not spending. People are choosing to shop in Paris, Milan and Berlin rather than here because the VAT rebate has gone,’ she said.
“It affects not only retailers but manufacturers and artisans down the supply chain. Skills will also be hit because businesses will have less investment. I wish the Government would take a more welcoming approach to people choosing to come and spend here in the UK.
“It clearly makes no sense that every country in the EU now offers a tax-free shopping scheme to tourists and we don’t. We are driving tourists who would otherwise be coming here into the framework of our competitors, and the impact will be seen in the number of retailers, jobs and ultimately economic growth.’
Sacha Zackariya, author of ‘Leading Travel and Tourism Retail’ and CEO of Prosegur ChangeGroup, a provider of ATMs, currency exchange bureaus and tax refund services, said: “The Government has just told thousands of retailers, the tourism industry and workers that they Couldn’t care less about them, and Central London was taxed for many more American candy shops.
“The tourist tax is killing jobs and pulling £11.1bn out of the economy as tourists enjoy VAT-free shopping in Paris, Milan and beyond. I’ve just come back from a trip around the world where I saw the amazing things shopping meccas are doing to attract tourists, and the contrast with the UK is staggering. If we can’t get this right, what chance do we have of competing with the countries that welcome tourists? This was the last chance for the Government to move forward with this before the election. If Labor is serious about growing the economy, I hope they are taking notice.’
Trevor Pickett, founder of luxury retailer Pickett, said: ‘This is bad news for the whole UK economy. Retailers, hospitality establishments, tourist attractions, even taxi drivers will suffer from lost tourist spending.
‘I saw the impact on myself on a trip to Paris the other day when I spent £500 in Zara – with the sales tax back, I saved £100 and got two free shirts. Previously I wouldn’t have bothered to make such a purchase but now there is a huge financial incentive to do so.
“The UK must be absolutely disgusted that it is forcing people to pay 20 per cent more than they would in the EU for the same goods. We have to hope that Labor understands that the abolition of the tourism tax is a victory for economic growth and public finances and chooses to act.’
Scott Parsons, UK Chief Operating Officer at Unibail-Rodamco-Westfield, operator of the two Westfield centres, said: “Today’s Budget is a huge disappointment for the retail and property sectors, with no significant announcement on business rates and no U- turning on tax-free shopping for tourists. These are clearly missed opportunities especially in this very important election year.
It is disappointing that calls from over 500 sector leaders to end the tourism tax have been ignored, despite strong data showing the vital importance of duty-free shopping to the UK economy.
“Furthermore, the current business rates system puts our high streets at a huge disadvantage compared to those in other European cities, with UK retailers facing almost ten times the financial burden of high street brands department. Lowering rates permanently is the most significant way to support the sustainable, long-term growth of the retail industry and show the world once and for all that the UK is open for investment.
“While Hunt has failed to deliver for industry, in contrast, the newly revealed Labor Party strategy to revitalize Britain’s high street holds great promise. By pledging to reform the outdated business rates system, Labor is signaling a more exciting future for the sector.”
In a statement the International Retail Association said: “It is very disappointing that the Treasury has not yet responded to the overwhelming evidence and calls from businesses across Britain about the damage that Britain is doing as the only European country that does not tax she offered. – free shopping for international visitors.
“Nor has the Treasury responded to evidence of the huge growth opportunity that would make Britain the only major European country where the 450 million EU residents could shop tax-free.
“We continue to call for an independent assessment of the full impact of duty free shopping. We don’t have that yet.
“All the OBR has done is revise its very limited projections for 2020 without accounting for the impact of growth on international visitor spending across Europe. And he didn’t even mention the potential of the new EU market.
“The Chancellor has said that “the government is grateful to the OBR for their review of the basic cost of ending tax-free shopping. The government will consider these findings alongside industry representations and wider data, and welcomes any further submissions in response. with the results of the OBR.” We look forward to continuing our discussions with them.”
Kay Buxton, chief executive of Marble Arch London BID, said: “While shopping accounts for 46% of all tourism spending, 54% is spent on hotels, dining out and visitor attractions so it is a shame that the chancellor has once again ignored widespread calls. from industry experts to remove the expenditure tax for international visitors.
“Independent research suggests that overseas visitors would spend an extra £3bn on hotels, restaurants, retail and visitor attractions if the tourist spending tax was removed. The UK’s international attraction to international visitors has been damaged by the introduction of a tax on tourism spending, so this is another opportunity missed by the Chancellor, which would have boosted hospitality and the much-welcomed visitor economy before.”
