Leading London businesses urge the Government to scrap the tourist tax
BusinessLDN is today (WEDNESDAY26th July) calling for the immediate restoration of tax-free shopping for international visitors to boost London and the wider UK economy.
In a submission to HM Treasury, the business campaign group, BusinessLDN highlights how scrapping the tourist tax would generate £4.1bn annually for the UK economy as a whole and create an additional 78,000 jobs, according to data from Oxford Economics.
The UK is an outlier in not offering tax-free shopping for international visitors and is seriously losing out as a result. American, Chinese, and Indian visitors can claim back the VAT when they visit competitor nations in continental Europe, such as France, Spain and Italy. Figures from Global Blue show that 10% of UK spending by international shoppers in 2019 has now moved to EU countries, which have kept VAT-free shopping.
BusinessLDN is also calling on the HM Treasury to ask the Office for Budget Responsibility to undertake an urgent review of the full impact of VAT-free shopping, which would provide an independent assessment of the true costs and benefits of this measure.
John Dickie, Chief Executive at BusinessLDN, 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. And thanks to spending that can’t be reclaimed, the increase in spend would also deliver an extra £350 million in tax revenues for the Exchequer every year. This is a win-win for the economy, public finances and the country. We need to act now to show the world that Britain is open for business.”
Mayor of London, Sadiq Khan, said: “I have long been calling for the Government to restore tax-free shopping for international visitors. It would help to increase the number of international tourists who visit London and the United Kingdom, which in turn will provide a much-needed boost to businesses and high streets across the country – while providing billions of pounds to the Treasury each year. It is a quick way for the Government to grow the economy and support sectors that have suffered disproportionately from the pandemic and the current cost-of-living crisis.”
Toby Courtauld, Chief Executive of GPE, said: “We’re in favour of the reinstatement of the VAT reclaim scheme. The UK is now the only European country not to offer tax free shopping and international visitors are increasingly taking their spend to other European destinations. The VAT refund for international travellers would bring a much needed £4.1 billion boost to GDP delivering growth in the economy that the Chancellor is targeting as well as generating separate tax revenues, supporting tourism in central London and creating jobs.”
Inderneel Singh, CEO of Edwardian Hotels London, said: “The government’s decision to end tax-free shopping in the UK has been detrimental not only to the retail industry, but also sectors such as tourism. We have noticed a growing trend where leisure travellers are choosing other European destinations over London because they offer tax-free shopping, which of course has a wider impact on the British tourism industry and the economy at large.”
Amelia Bright, Executive Director – London Estate, Grosvenor, said: “We urge the Treasury to reverse its decision to end the VAT reclaim scheme. We partner with c500 retailers who are already struggling with the impacts of COVID and runaway inflation — this hits them all. The only winners are Paris, Madrid and Milan. The scheme’s re-introduction would be a pragmatic step to encourage tourists and their spending power back to the UK supporting jobs, the economy and Brand Britain.”
Ros Morgan, Chief Executive, Heart of London Business Alliance, said: “The tourist tax is disincentivising international travellers from visiting London and our fantastic cultural institutions. Theatres, galleries and museums are heavily reliant on overseas tourists, but they are now choosing to visit our international competitors who offer tax-free shopping. Culture is the heartbeat of our capital, playing a vital role in the UK’s economic recovery. The Government must review the data and consider reinstating tax-free shopping to incentivise people from overseas to visit the UK and help spur economic growth.”
Ross Baker, Chief Commercial Officer, Heathrow said: “As the UK’s front door to the world, Heathrow is seeing first-hand the increasing economic damage of the tourist tax. 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% cheaper. Whilst tourist spending in France surges past 2019 levels at a record €58 billion, the UK falls well short of 2019 levels at £26bn. Heathrow echoes calls urging the Government to take up the opportunity to introduce a new digital tax-free shopping incentive, which would reinstate the UK’s international competitiveness and deliver economic growth to every part of the country.”
Wendy Spinks, Commercial Director at HS1 Ltd, said: “As the operator of the only rail line bringing people from Europe to the UK, we see the economic benefits tourists provide to our economy every day. Restoring tax-free shopping would provide another incentive for people to visit the UK. It would help grow the HS1 line through greater passenger numbers, and would provide a greater benefit to the UK economy from tourist spending.”
Rachel Bulford, Retail Director, London Gatwick, said: “Tax-free shopping supported retail sales and jobs for local people living close to London Gatwick. It also attracted international visitors and supported the tourist sectors in London and the South East. It is imperative tax-free shopping is reinstated in the Autumn Budget, as key, big-spending travel markets like China grow back, and before the UK falls irretrievably behind other European nations that have tax-free shopping in place.”
Gareth Powell, Managing Director of London Stansted Airport said: “London Stansted is one of the largest gateways for Europeans into the capital, and research in 2022 found that inbound tourism through our airport already supports nearly 24,000 jobs in the city. The reintroduction of tax-free shopping to encourage more overseas visitors would increase those numbers and give our economy a massive boost.”
Dee Corsi, Chief Executive at the New West End Company said: “The calls from businesses and industry bodies are clearly getting louder. In what is a significant win for our ongoing campaign efforts to reinstate tax-free shopping for international visitors, the Treasury have now indicated that they are listening, and a Westminster debate has been secured on 7 September. This tourist tax is an undeniable drag on the UK economy and we are working with our members to ensure that they submit evidence to the Treasury that proves this, we are confident that this will lead to an official policy review. We cannot undo the damage that has already been done, but we can still avert changes in long-term shopper and visitor behaviour that will have cross-sector repercussions for years to come.”
Ruth Duston, Managing Director for Primera Corporation, which runs 14 London business improvement districts, said: “In the context of Brexit, Covid and a worldwide cost of living crisis, the so-called tourist tax is further harming the UK’s attractiveness and getting in the way of a return to pre-pandemic tourism levels. London has traditionally accounted for about half the visits to the UK, and with the latest full year tourism data released by the ONS showing that tourism to the capital was still down 26% in 2022 compared to 2019, with spend still down 10%, the UK’s economy is bound to suffer. If we are serious about kickstarting growth in London, and therefore in the whole of the UK, we must reinstate VAT-free shopping, or resign to seeing tourists head to our neighbours on the continent.”
The retail, tourism and leisure sectors make a significant contribution to London’s economy and employment. Retail accounts for 663,000 jobs, accommodation & food some 450,000 jobs and the arts, entertainment & recreation sector has a further 223,000 jobs. Taken together, that’s over 20% of all employment in London.
BusinessLDN aims to make London the best city in the world in which to do business, working with and for the whole UK. The business campaign group represents businesses of all sizes and sectors across the economy, including retail, hospitality, leisure and tourism.
ONS Workforce jobs by industry and region, June 2023