Scrapping of tourist tax costing the UK $5.32 billion

It was mainly popular with affluent tourists who would travel to London to spend on designer goods

Scrapping the tourist tax could generate £4.1 billion ($5.32 billion) annually for the UK economy, according to a new research, as a number of leading business owners’ call for the government to restore VAT shopping for international tourists.

Rishi Sunak removed the tax which saw international shoppers able to claim 20% back with their purchases. It was mainly popular with affluent tourists who would travel to London to spend on designer goods.

However, many of these tourists are now preferring central Europe places like Paris, where they can claim tax back on luxury goods.

Fresh calls have now been made to remove the tax by corporate campaign group BusinessLDN, which in a letter to HM Treasury said the UK was now missing out on £4.1 billion yearly by cutting the scheme.

Scrapping the tax would also create an additional 78,000 jobs for the country’s economy, as per data from Oxford Economics.

The tourist tax is an economic own goal. Re-introducing the VAT reclaim scheme would bolster UK’s flatlining economy through increased spending from international visitors in our shops, restaurants, hotels and more, John Dickie, chief executive at BusinessLDN, said.

And thanks to spending that cannot be reclaimed, the rise in spend would also deliver an additional £350m in tax revenues for the Exchequer annually. This is a win-win for the economy, public finances and the country. We need to act now to show the world that UK is open for business.

Heathrow CCO Ross Baker has also spoken out against the tourist tax, terming the scrapping of the scheme as “disastrous” for UK competitiveness as goods in Europe are up to 20% cheaper.

Baker added: Whilst tourist spending in France soars beyond 2019 levels at a record €58 billion (£49.7 billion), the UK falls well short of 2019 levels at £26 billion.

Heathrow echoes calls urging the government to take up the opportunity to introduce a new digital tax-free shopping incentive, which would re-establish the UK’s global competitiveness and deliver economic growth to every part of the country.

The move has also received the support of London mayor Sadiq Khan, who said he has “long been calling” for the government to reinstate tax-free shopping for international visitors, he said.

It would help to increase the number of international tourists who visit London and the UK, which in turn will provide a much-needed support to businesses and high streets across the country – while providing billions of pounds to the Treasury each year, Khan said.

He said: It is a swift way for the government to grow the economy and support sectors that have suffered disproportionately from the covid crisis and the present cost of living crisis.