Tory rebels demand Hunt scrap tourist tax

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In their letter the group says that ditching the tax could lead to a 90pc boost to spending for every pound in VAT rebated on visitor sales.

“Research by the Association for International Retail (AIR) shows that British shops are losing £1.5bn per year as non-EU international visitors choose instead to spend in France, Italy, and Spain where tax-free shopping schemes are in place,” they said.

“Introducing a new, internationally competitive tax-free shopping scheme would help UK businesses rebuild the economy and for every £1 rebated in tax-free, the Treasury would gain £1.90 in return through the direct and indirect effects of increased visitor spending, according to the AIR.

“By positioning the UK as a world-renowned shopping destination, the scheme can foster inward investment and growth across the visitor economy – strengthening our supply chains and driving economic activity in all regions and businesses throughout the UK. 

“We are encouraged by your recent comments on the matter at the Autumn Statement and urge you to introduce tax-free shopping for international visitors at the next fiscal event.”

Critics say the wider loss to the UK economy of closing the tax perk is £2.5bn more than any gain in VAT revenues making it a major “own goal” for a government desperately trying to kick-start growth.

Visits from the rest of the world outside Europe and the US were down by 19pc between July and September compared to the same period in 2019, according to the Office for National Statistics (ONS).

Spending by visitors from China was down 41pc in the summer last year compared with 2019. 

By contrast, visitor spend in France and Italy has increased significantly post-pandemic from key visitor markets including the USA.

Earlier this week FTSE 100 bosses including Stuart Machin, the chief of Marks & Spencer, and Paul Marchant, boss of Primark, were among 420 signatories writing to the Chancellor urging him to reintroduce the VAT rebate scheme.

“It is clear that the removal of tax-free shopping is turning into an extraordinary own-goal for the UK,” they said. “We understand that there are pressures on the public finances at the present time. But the evidence shows that reinstating tax-free shopping would be a win for both business and the taxpayer.”

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