Planned Tourist VAT Hike Will Hit Red Wall Jobs, Benefit EU’s Duty Free Shoppers

Ahead of Sunak’s spending review tomorrow, research from a new group of leaders in tourism, travel, hospitality and retail across the country implores the Chancellor to scrap plans to abolish the VAT Retail Export Scheme from January 2021, with figures suggesting the move will impact over £22 billion worth of spending on the travel industry by international visitors; with the North and Midlands set to account for almost one-fifth of total UK impact. A double whammy policy betrayal of both old and new Tory principles simultaneously…

The planned move by the Treasury will end the VAT rebate scheme that allows non-EU international visitors to receive a refund on the VAT from certain purchases made in the UK; with new figures from the Together for Tourism Alliance showing the hike “risks a loss of £10 billion in tourist sales” to other European countries who will continue to offer the scheme. Within the West Midlands alone, they estimate up to 13,500 jobs could be at risk in the core red wall…

The retail private sector wants a digitised end-to-end software solution, at no expense to the taxpayer. They are pledging millions to develop software for a digital customs infrastructure – as Turkey, Portugal, Spain, Italy and France have done to keep the revenue from international tourists coming in. Retailers, airports and ports have taken the initiative and digitised their point-of-sale for international customers. Taxpayers will benefit from a thriving retail sector that makes its contribution to an economic recovery.

The proposal from Sunak to abolish duty free shopping come as the Irish government has sensibly gone in the opposite direction, reducing the minimum purchase threshold for tax-free shopping from €175 to €75 to “to ensure that Irish retailers are supported in this extraordinary time.” Not only does this boost the attractiveness of the UK’s closest neighbour to foreign shoppers, it means UK consumers could fly to Dublin and spend €75 on shopping with no VAT charge. If Dublin is reducing taxes to support retailers, what message does the UK’s government policy send to tourists? 

UPDATE:  The Treasury are not amused, unsolicited, they have sent us this below:

“Around 92% of visitors to the UK don’t use the VAT Retail Export Scheme and extending it to the EU could increase total costs up to £1.4 billion a year. Tax-free shopping is still available in store when goods are posted to overseas addresses. This is a getting rid of a tax cut that mainly benefits foreign billionaires.”

Foreign billionaires? Sounds like something Corbynistas would brief.

Let’s look at the numbers; HMRC estimates that rather than just a few foreign billionaires, 1.2 million tourists claimed some £500 million of duty back on £2.5 billion of purchases. Extending the scheme to EU citizens could, according to the Treasury’s own figures, potentially see EU tourists claim back £1.4 billion in duties on goods worth £7 billion. This seems like something that would be excellent news for jobs in the hard hit the retail sector.

That foreign tourists who opt to have their purchase delivered to their home country will still be able to get it duty free seems like a gaping loophole. The Treasury also say the 138,000 job losses claimed are an exaggeration. Surely Sunak should not be contemplating implementing any policy that costs a single job? 

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