ondon business chiefs on Wednesday ramped up their campaign to persuade Jeremy Hunt to axe the “tourist tax” warning that the “only winners” from it were cities such as Paris, Madrid and Milan.
The BusinessLDN group published a new analysis, based on a report by Oxford Economics, which showed the capital could be given a £1 billion boost, and 13,400 jobs, if the Chancellor restored tax-free shopping for international visitors.
In a submission to the Treasury, it also urged him to ask the Office for Budget Responsibility to do a comprehensive review of the “tourist tax”, considering the wider economic benefits including to restaurants, theatres and hotels, as well as retailers.
BusinessLDN chief executive John Dickie said: “The tourist tax is an economic own goal. 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.”
He argued that axing the levy would deliver an annual £350 million economic fillip to the UK’s public finances.
The Treasury disputes this figure, putting the cost at up to £2 billion, with the differences significantly down to varying estimates over how many extra international visitors would come to the UK if tax-free shopping was restored.
Hoewever Amelia Bright, director of London Estate, Grosvenor, also criticised the levy, stressing: “The only winners are Paris, Madrid and Milan.”
Ros Morgan, head of the Heart of London Business Alliance, added: “Theatres, galleries and museums are heavily reliant on overseas tourists, but they are now choosing to visit our international competitors.”
Inderneel Singh, chief executive of Edwardian Hotels London, emphasised: “We have noticed a growing trend where leisure travellers are choosing other European destinations over London because they offer tax-free shopping.”
Pressing for an official Treasury review of the policy, New West End Company chief Dee Corsi said: “This tourist tax is an undeniable drag on the UK economy.”
Ruth Duston, managing director for Primera Corporation, which runs 14 London business improvement districts, explained: “If we are serious about kick-starting growth in London, and therefore in the whole of the UK, we must reinstate VAT-free shopping.”
Toby Courtauld, chief executive of Great Portland Estates, said: “The UK is now the only European country not to offer tax-free shopping.”
Senior Tory Sir Geoffrey Clifton-Brown has secured a Commons debate on September 7 on tax-free shopping for international visitors.
Labour Mayor of London Sadiq Khan stressed that restoring it would be a “quick way” for the Government to grow the economy.
But a Treasury spokesperson said: “VAT-free shopping does not directly benefit Brits – it lets foreign tourists who buy items in the UK to claim back VAT as they return home.
“The scheme could cost British taxpayers around £2 billion a year at a time when we’ve already had to take difficult decisions to get debt falling and fewer than one in ten non-EU visitors used the previous scheme, showing it’s not a significant attraction for tourists.”
Airport and rail chiefs also criticised retaining the levy.
Heathrow’s chief commercial officer Ross Baker said: “The decision is disastrous for UK competitiveness as tourist spend in the UK is now eclipsed by our European neighbours where goods are up to 20 per cent cheaper.”
Gatwick’s retail director Rachel Bulford called on the Chancellor to bring back the tax-free shopping in the Autumn Budget “as big-spending travel markets like China grow back”.
Stansted managing director Gareth Powell said the move would give the UK economy a “massive boost”.
Wendy Spinks, Commercial Director at HS1 Ltd, the high speed rail link to the Channel used by Eurostar, stressed it would “provide another incentive for people to visit the UK”.