The “tourist tax” is costing the UK £10.7bn in lost GDP and deterring two million tourists per year, the Centre for Economics and Business Research (CEBR) has revealed.
The economic consultancy found the extra sales generated by reinstating VAT-free shopping for tourists would outweigh losses associated with sales tax refunds by £2.3 billion in 2023.
An open letter to the Chancellor, describing restoring the traditional VAT rebate on shopping by foreign tourists as a “spectacular own goal” for the UK economy, has been signed by 350 business leaders.
Meanwhile, MPs across all parties have called for the “tourist tax” to be scrapped.
The move has effectively made the UK the most expensive place to shop in Europe, says the research.
Signatories to the letter also highlighted evidence that tourists are opting to travel and spend in cities like Paris, Milan and Madrid instead of the UK as a result.
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Chairman of Rocco Forte Hotels, Sir Rocco Forte, who organised the letter, pointed out that Paris, Milan and Berlin “can’t believe their luck”.
As well as increased spending, the CEBR found a fully utilised tax-free shopping scheme would have supported an estimated 172,000 jobs during 2022, or 201,000 in 2023.
Forte said: “The chorus of criticism from business leaders of the tourist tax has become deafening and a responsible Government can ignore it no longer…
“Not only have 350 leaders of some of Britain’s leading businesses and tourist attractions now signed a letter warning that valuable tourist revenue is being lost, we also have economic analysis showing very clearly that restoring tax-free shopping would boost the public finances and the wider economy”.
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