An open letter to chancellor Jeremy Hunt has been signed by 350 business people across the retail, hospitality, arts and tourism sectors, and calls for the reintroduction of tax-free shopping ahead of the government’s debate on the topic, scheduled for September 7.
Among the signatories are the CEOs, general managers, designers and directors of companies such as Mulberry, British Fashion Council, Alexander McQueen, Liberty London, Victoria Beckham, Marks & Spencer and Fenwick, among many others.
The letter outlines the array of issues caused by the decision to end the VAT-free shopping scheme in 2021, most notably the missing out of significant spending from that of international visitors at some of the UK’s most popular tourist destinations.
It added: “The Treasury claims this move is saving the taxpayer two billion pounds 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.”
Government’s ‘tourist tax’ costing the UK 10.7 billion pounds in lost GDP
Signatories also noted that the Treasury’s calculations fail to take into account the fact that tourists spend in hotels, restaurants, theatres, museums and tourist attractions.
The letter went on to highlight a particularly crushing occasion as a result of the lack of tax-free options, that of the closure of Mulberry’s flagship store on Bond Street, which had shut its doors “as a direct result” of the move.
Every country remaining in the EU now offers tax-free shopping, and the signatories claim that the UK has “suddenly started charging 20 percent more than other countries do for the same goods”.
They also noted that UK residents were further starting to take advantage of tax-free shopping in Europe, with “450 million pounds disappearing from UK high streets”.
According to a Centre for Economics and Business Research (CEBR) report commissioned by Rocco Forte Hotels and Watches of Switzerland, the government’s ‘tourist tax’ is costing the UK 10.7 billion pounds in lost gross domestic product (GDP).
CEBR said that if the traditional scheme was restored there would be an overall benefit to public finances, with additional revenues generated understood to possibly outweigh the losses associated with sales tax refunds by 2.3 billion pounds in 2023.
The topic has been widely debated among press and businesses as retailers desperately call on Prime Minister Rishi Sunak to reverse the decision to remove VAT-free shopping for foreign visitors.
Burberry chair Gerry Murphy and Harvey Nichols CEO Manju Malhotra are among those that have publicly spoken out against the move. In May, Walpole, the industry body that represents more than 250 British luxury companies, also released a report through which it urged the government to bring back the scheme.