Financial secretary Nigel Huddleston has warned that a u-turn on the so-called “tourist tax” is unlikely to be announced at next month’s spring Budget.
Huddleston, the minister responsible for the tax system, said in a letter seen by The Times that it was “not possible to introduce the same system as before, given that it would now need to be open to visitors from the EU as well as the rest of the world”.
“Any new scheme, no matter the design, would take time to legislate for and implement in order to prevent non-compliance risks and ensure operation,” he said in correspondence to one of the leaders of the tourist tax campaign.
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He added that “the Chancellor has been clear that being responsible with the public finances is a key priority” and as such, “a new VAT-free shopping scheme could subsidise a large amount of tourist spending that already occurs without a tax relief in place, without bringing any direct benefits to the British public”.
His comments come as retail leaders and campaigners were hoping that Hunt would reintroduce the incentive for international visitors in next month’s Budget after he requested the Office for Budget Responsibility (OBR) look into whether the decision to scrap it should be reversed.
The New West End Company and the Association of International Retail (AIR) submitted evidence to Downing Street last week refuting the Treasury’s assumption that a reintroduction would cost £2.5bn in forgone tax revenues.
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