Conservative rebels call on Hunt to scrap tourist tax

Previously, the Chancellor said he would “take another look” at the pros and cons of VAT-free shopping. Photo: REUTERS/Peter Nicholls

A group of MPs led by Tory rebels has called on Jeremy Hunt to scrap the tourism tax on retailers.

A cross-party group of 64 people, including 38 Tory MPs and peers, has asked the Chancellor to introduce a “new internationally competitive duty-free shopping scheme” for international visitors to the UK.< /p>

They warn that the end of duty free shopping in 2021 has had «significant consequences» for tourism, manufacturing, leisure, retail and hospitality businesses across the UK, not just in London.

They include includes former cabinet ministers Dame Priti Patel, Sir Liam Fox, Sir Iain Duncan Smith, Damien Green and David Jones, as well as former ministers Kelly Tolhurst, who oversaw aviation, Caroline Dinenage, the current chair of the culture committee, Tracey Crouch, the transport secretary, and Paul Scully .

Campaigners believe the Treasury is actively consideringscrapping the tourist tax amid growing evidence of the damage it is doing to visitor spending compared to the UK's rival countries.

Mr Hunt said in a statement in the autumn that he would take “another look” at the pros and cons of tax breaks after studies showed a decline in spending and visitor numbers.

In its letter, the group says scrapping the tax could lead to a 90% increase in costs for every pound of VAT deducted on visitor sales.

“Research from the Association for International Retailing (AIR) shows UK stores are losing £1.5 billion a year as non-EU visitors choose to instead spend money in France, Italy and Spain, which have duty-free shopping schemes, they said.

The introduction of a new, internationally competitive tax-free shopping scheme will help UK businesses rebuild the economy, and for every £1 received from duty-free shopping, the Treasury will receive £1.90 in return through, according to AIR, the direct and indirect impacts of increased visitor spending.

“By positioning the UK as a world-renowned shopping destination, this scheme has the potential to attract investment and boost the visitor economy, strengthening our supply chains and stimulating economic activity in all regions and businesses across the UK.

“We are encouraged by your recent comments on this issue in the Autumn Statement and urge you to introduce duty-free shopping for international visitors at the next financial event.”

Critics say the wider toll on the UK economy from the end of the 2nd tax break will £.5 billion is more than any increase in VAT revenue, making it a major «own target» for a government desperate to kick-start economic growth.

Visitors from the rest of the world outside Europe and the US fell by 19% between July and September compared with the same period in 2019, according to the Office for National Statistics (ONS).

Chinese visitor spending in summer last year decreased by 41 percent compared to 2019.

By contrast, visitor spending in France and Italy has risen significantly since the pandemic from key visitor markets including the US.

Earlier this week, FTSE 100 index executives including Stuart Machin, chief Marks & Spencer and Paul Marchant, the chief executive of Primark, were among 420 people who signed a letter to the Chancellor calling for the VAT refund scheme to be reintroduced.

“It is clear that the end of duty free shopping is turning into an extraordinary own goal for the UK,” they said. “We understand that there is currently pressure on public finances. However, the evidence shows that reintroducing duty-free trade will benefit both businesses and taxpayers.”