Business leaders call on Chancellor Jeremy Hunt to reinstate tax-free shopping for overseas visitors

A coalition of business leaders today calls for the return of tax-free shopping for overseas tourists.

In a letter to the Chancellor, scores of retail, hospitality and tourism bosses warn that removing the VAT refund for visitors has been an ‘extraordinary own goal’.

Reinstating it would be a win both for business and the taxpayer, they say, with research suggesting it could bring a multi-billion-pound boost to the economy.

Today the Mail launches a ‘Scrap The Tourist Tax’ campaign in support of firms demanding the Government thinks again.

Sir Rocco Forte, British Airways and Fortnum & Mason all argue that the cost of 20 per cent VAT refunds is outweighed by the enormous benefits of encouraging more visitors to Britain.

Sir Rocco, who organised the letter to Jeremy Hunt, told the Mail that bringing back tax-free shopping would stimulate growth and be an ‘easy win’ for ministers

These extra tourists would spend across the economy and nation – on hotels, restaurants, entertainment and transport – generating tax revenues and creating jobs.

Tax-free shopping would bring a much-needed £4.1billion boost to GDP and support 78,000 jobs, according to research by Oxford Economics. And despite the Treasury claiming it would cost it £2billion in lost taxes, experts have estimated there would in fact be a net gain to the Exchequer of at least £350million a year.

Sir Rocco, who organised the letter to Jeremy Hunt, told the Mail that bringing back tax-free shopping would stimulate growth and be an ‘easy win’ for ministers.

‘Jeremy Hunt blithely talks about growth, and is doing nothing to help growth at the present time,’ he said last night.

‘This would help growth significantly and it certainly has no impact on inflation. There is no reason not to do it.’

The 68 signatories to the letter to Mr Hunt include the chairman of British Airways and the chief executives of Mulberry, the Royal Opera House and Fortnum & Mason, as well as the business director of Bicester Village.

The letter brands the decision in 2021 to scrap the longstanding scheme that allowed international tourists to shop tax-free as ‘puzzling’ and ‘ill-timed’.

Liz Truss sought to reintroduce the VAT rebate during her short tenure in No10, but Mr Hunt reversed the decision last autumn.

People walk past Fortnum and Mason in central London

Chancellor of the Exchequer Jeremy Hunt in his No11 Downing Street office

The letter states: ‘Every country remaining in the EU now offers tax-free shopping, while we don’t. Effectively, we have suddenly started charging 20 per cent more than other countries do for the same goods. 

The Treasury claims this move is saving the taxpayer £2billion a year, but this is flawed and misleading. 

The foreign visitors who have traditionally come from the US, Middle East, China and elsewhere to shop for the best of British inject large sums into the broader economy, on top of what they spend on retail purchases.’

Shopping has traditionally been one of the most popular reasons for visiting the UK, and the tax-free scheme helped cities like London, Manchester and Edinburgh, as well as retail villages.

But the removal of the VAT refund is driving tourists away from London to cities like Paris, Madrid and Milan, campaigners say.

Earlier this year, Mulberry closed its store in London’s Bond Street as a result of the loss of tax-free shopping.

Research also suggests the UK’s recovery from the Covid-19 pandemic is being hampered by the removal of the scheme. 

Britain is now at 64 per cent of 2019 levels of consumer spending, while France has recovered to 108 per cent, according to data from tax refund experts Global Blue.

The letter concludes: ‘It is clear that the removal of tax-free shopping is turning into an extraordinary own goal for the UK.

‘We understand that there are pressures on the public finances at the present time. But the evidence shows that reinstating tax-free shopping would be a win for both business and the taxpayer.’

Sir Rocco said Britain’s future looked ‘very bleak at the moment’, and he had ‘never been so depressed since the 1970s about the way things are going’.

‘We’ve really given up in this country in terms of seeing this country move forward and grow and be prosperous,’ he said.

He urged the Government to seize the benefits of Brexit by introducing tax-free shopping for Europe, which was not the case before the UK left the EU.

‘There is no point in Brexit unless you do something with it,’ he said. The hotelier said he had noticed that forward demand for business in Italy, where he owns several hotels, is ‘much stronger than it is for the UK’.

The chief executive of Mulberry, Thierry Andretta, warned that the removal of tax-free shopping for tourists was causing ‘significant’ harm to British brands, retail and hospitality. 

‘If we are going to be able to get the UK economy back to growth, we need a level playing field with Europe as currently we simply cannot compete, with Paris, Berlin and Milan all benefiting at our expense,’ he said.

‘This is not just about shopping tourism – this is about restaurants, hotels, live entertainment, and museums, as well as about job creation.’

Manju Malhotra, chief executive of Harvey Nichols, another signatory to the letter, said EU and international residents had ‘diverted their spending from the UK into Europe with the financial incentive of being able to shop tax-free’.

‘This doesn’t just impact retailers like Harvey Nichols but the whole ecosystem of hospitality and businesses across the UK, which benefit from high-value customers visiting our country,’ she said.

‘Furthermore, British citizens now qualify for tax-free shopping and are electing to spend in Europe rather than within the UK.’

Brian Duffy of Watches of Switzerland said: ‘The removal of tax-free shopping for international visitors has been felt by businesses across the UK, particularly in key tourist destinations such as London, Manchester and Edinburgh.  

‘Tourists are switching their travel plans to visit cities like Milan or Paris, and the result is a drop in footfall and sales for the UK’s hospitality and retail industries.’

Last night senior MPs joined the clamour of calls urging the Treasury to rethink. Conservative former business secretary Jacob Rees-Mogg said: ‘Tax-free shopping encourages tourism, boosts the economy and costs nothing.

‘Foreign visitors will spend money elsewhere rather than pay an extra tax on the UK so everyone loses under the current system.’

Tory former trade secretary Dr Liam Fox added: ‘We need to look at the wider picture for UK businesses, including the hospitality industry, and get away from simplistic bean counting assumptions.’

A government spokesman said: ‘We are committed to an approach to the public finances that is responsible and helps get debt down. Estimates from the independent Office for Budget Responsibility show implementing a wide-ranging tax-free shopping scheme would come at significant cost.

‘Tax-free shopping continues to be available for all non-UK visitors who purchase items in store and have them sent directly to their overseas address.’

A plea to the chancellor from 68 leading business chiefs

Dear Chancellor, 

The pandemic placed most businesses under acute pressure, particularly those in the hospitality, retail, travel and tourism sectors which we represent. So, the Treasury’s decision in 2021 to end the longstanding scheme that allowed international tourists to shop tax-free was puzzling and ill-timed.

Liz Truss’s shortlived government announced plans to reintroduce the VAT rebate to boost the high street, but this has now been reversed.

Every country remaining in the EU now offers tax-free shopping, while we don’t. Effectively, we have suddenly started charging 20 per cent more than other countries do for the same goods. The Treasury claims this move is saving the taxpayer £2billion a year, but this is flawed and misleading. The foreign visitors who have traditionally come from the US, Middle East, China and elsewhere to shop for the best of British inject large sums into the broader economy, on top of what they spend on retail purchases.

Figures from Visit Britain show that shopping has traditionally been one of the most popular reasons cited for visiting the UK. Indeed, British business traditionally made £3.5billion in tax-free sales to tourists every year. The scheme benefited tourist hotspots like London, Manchester, and Edinburgh, as well as out of town shopping villages.

Visitors did not just spend in retail stores – their custom supported hotels, restaurants, and theatres. Oxford Economics has concluded that if all the economic impacts of a tax-free shopping scheme are taken into consideration, the UK would, in fact, benefit to the tune of hundreds of millions of pounds a year.

The impact of its removal is already being seen. It was depressing to witness a great British brand like Mulberry closing the doors of one of its flagship stores as a direct result of the loss of tax-free shopping, as it did earlier this year.

New research from tax-free shopping experts Global Blue shows the UK is losing out on the significant spending made by international travellers as global travel resumes. Paris, Madrid and Milan can’t believe their luck as the UK’s lack of tax-free shopping drives travellers to spend in Europe.

Data covering international visitors from the USA, Gulf Cooperation Council (GCC) and south-east Asia regions from a sample of 11 leading retailers shows that whilst the UK has recovered post-pandemic to 64 per cent of

2019 levels of consumer spending, Italy is at 79 per cent, Spain at 84 per cent and France, which is benefiting most from the UK Government’s decision to remove tax-free shopping, has recovered to 108 per cent.

Looking at individual nationalities, the differences become even more pronounced. For USA visitors, the UK is back to 101 per cent of 2019 spend. However, Italy is enjoying spending from US visitors at 190 per cent of 2019 levels. Spain is up to 201 per cent and France is at a staggering 226 per cent.

For GCC visitors, the UK is at only 65 per cent of 2019 levels whilst Spain is already at 158 per cent, Italy at 166 per cent, and France topping out at 198 per cent.

In addition, UK residents are starting to take advantage of tax-free shopping in Europe, with £450million

disappearing from high streets.

It is clear that the removal of tax-free shopping is turning into an extraordinary own goal for the UK.

We understand that there are pressures on the public finances at the present time. But the evidence shows that reinstating tax-free shopping would be a win for both business and the taxpayer.

We call on you to think again.

Yours sincerely

■ Sir Rocco Forte, Chairman, Rocco Forte Hotels

■ Sean Doyle, CEO and Chairman, British Airways

■ Thierry Andretta, CEO, Mulberry

■ Neil Clifford, CEO, Kurt Geiger

■ Caroline Rush, CEO, British Fashion Council

■ Alex Beard, CEO, Royal Opera House

■ Anya Hindmarch, Founder and Creative Director, Anya Hindmarch

■ Fraser Brown, Retail Director, Heathrow Airport

■ Sir Paul Smith, Designer, Paul Smith

■ Tom Athron, CEO, Fortnum & Mason

■ Jonathan Akeroyd, CEO, Burberry

■ Helen Brocklebank, CEO, Walpole

■ Hannah Colman, CEO, Jimmy Choo

■ Christopher Cowdray, CEO, Dorchester Collection

■ Dee Corsi, CEO, New West End Company

■ Paul Barnes, CEO, Association of International Retail

■ Gianfilippo Testa, CEO, Alexander McQueen

■ Paul Jackson, General Manager, Claridge’s

■ Manju Malhotra, CEO, Harvey Nichols

■ John Durnin, Business Director, Bicester Village

■ Knut Wylde, General Manager, The Berkeley

■ Eric Heerema, Chairman and CEO, Nyetimber

■ Kiki McDonough, Founder and Creative Director, Kiki McDonough

■ Sandeep Bhalla, General Manager, The Connaught

■ Theo Fennell, Founder, Theo Fennell

■ Andrew Stembridge, Executive Director, Iconic Luxury Hotels

■ Franck X Arnold, Regional Vice President and Managing Director, The Savoy London

■ Christian Bachler, Executive Vice President, Wedgwood

■ Guillaume Marly, Managing Director, Hotel Café Royal

■ Andrew Henning, General Manager, Grosvenor House Suites

■ Antony Lindsay, CEO, Fabergé

■ Thomas Kochs, Managing Director, Corinthia London

■ Michael Wainwright, Managing Director, Boodles

■ Philipp and Mark Mosimann, Mosimann’s Private Dining Club

■ Michael Bonsor, Managing Director, Rosewood London

■ Claire German, CEO, Design Centre Chelsea Harbour

■ Julia Carrick, CEO, Julia Carrick Luxury

■ Hugh Seaborn, CVO and CEO, Cadogan

■ Joanne Rees, Managing Director, Elizabeth Gage

■ Trevor Pickett, CEO, Pickett

■ Brian Duffy, CEO, Watches of Switzerland Group

■ Pamela Harper, Chairman and CEO,

Halcyon Days and The Caverswall China Company

■ Giles English, Co-Founder, Bremont Watch Company

■ Chris Roberts, Managing Director, Como Holdings

■ Sophia Hirsh, Managing Director, Hirsh London

■ Nicholas Bond, Owner and Director, Franchetti Bond

■ George Somlo, Director, Somlo Antiques London

■ Adil Mehboob-Khan, CEO, Liberty London

■ Luca Donnini, CEO, Temperley London

■ Derrick Hardman, Managing Director, Global Blue (UK)

■ David Edwards, Managing Director, Seiko UK

■ Robert Ettinger, CEO, Ettinger London

■ Charlie Pragnell, Managing Director, Pragnell

■ Annoushka Ducas, Founder and Creative Director, Annoushka Jewellery

■ Erdem Moralioglu, Designer and Philippa Nixon, CEO,

Erdem

■ Sean Gilbertson, CEO, Gemfields

■ Adrian Maronneau, Managing Director, Bucherer UK

■ Nicholas Brooke, CEO, Sunspel Limited

■ Simon Cundey, Managing Director, Henry Poole

■ Martin Mason, Managing Director, Tricker’s

■ Sacha Rose, CEO, Derek Rose Ltd

■ Charlie Holland, CEO, Gusbourne Fine English Wines

■ Julian Moore, Managing Director, DR Harris

■ Hilary Freeman, Managing Director, Edward Green

■ Jamie Gill, Executive Director, Roksanda

■ Chris Gaffney, CEO, Johnstons of Elgin

■ Steven Medway, Chief Executive, Knightsbridge Partnership and King’s Road Partnership

■ Baton Berisha, CEO, The Wolseley Hospitality Group