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Tourist tax is unlikely to be overturned in the Spring Budget despite recent campaigning from UK retailers, The Times has revealed.
Last week, it was reported that the Association of International Retail (AIR) and New West End Company have submitted new evidence to Downing Street suggesting that the amount of lost VAT will be just one fifth of the Treasury’s projection because overseas shoppers spend less money on shopping than hotels and leisure.
The AIR said that the original forecast was based on the assumption that tax-free shopping has little to no effect on travellers spending behaviour and that the cost of foregone VAT is likely to be closer to £525m.
In an official announcement issued in January, AIR said: “Many international visitors to Europe are on multi-country tours and all the evidence shows they are choosing to shop more outside the UK as they become aware that they cannot claim back VAT from purchases made in Britain.”
As a result, AIR suggests that reintroducing VAT-free shopping for all would increase EU tourists numbers which would subsequently increase spending by as much as £3.8bn per year.
Paul Barnes, chief executive of the AIR, told The Telegraph: “The Treasury’s original forecasts were made during the 2020 covid lockdown when there was no travel data available to help inform them. But now we have masses of new data that shows the impact of tax-free shopping on the behaviour and spending levels of international travellers.”
