Fresh call to ditch ‘tourist tax’ to boost London economy

Recent study by Centre for Economics and Business Research (CEBR) found the “tourist tax” is costing the UK £10.7bn in lost GDP, reports Noah Vickers, Local Democracy Reporter

Trafalgar Square
Trafalgar Square

Fresh calls have been made at the Conservative Party conference for the UK’s so-called ‘tourist tax’ to be scrapped.

Muniya Barua, deputy CEO of advocacy group BusinessLDN, was joined on Tuesday (3rd) by two London Tory politicians in calling for VAT-free shopping to be announced in the upcoming autumn statement.

Levelling up minister Lee Rowley refused to commit to the policy, saying it was not a matter for his department, but that the government was “totally aware of” the issue.

Until January 2021, non-EU visitors to the UK were able to get a VAT refund on their shopping by presenting their receipt at the airport.

The VAT refund scheme ended after the UK left the EU, with the government arguing that it was “a costly relief which does not benefit the whole of GB equally”.

But calls have since been made for its return. A recent study by the Centre for Economics and Business Research (CEBR) found that the “tourist tax” is costing the UK £10.7billion in lost GDP and putting off two million tourists from visiting each year.

The topic was raised at a Tory conference panel event organised by London Councils – a cross-party organisation which brings together the capital’s borough authorities.

Muniya said reintroducing the tourist perk “would make a big difference” to the city’s economy. “Having just come back from a summer holiday in France and Spain, they’re pushing VAT-free shopping pretty hard,” she said.

“There’s evidence from the likes of London and Partners [a City Hall agency] that tourists are coming here and cutting their stay slightly shorter to go over to the EU, and take advantage of VAT-free shopping.”

Muniya’s call was backed by Neil Garratt, Tory group leader on the London Assembly, who agreed it was “a big issue, particularly in central London”.

They were joined by Elizabeth Campbell, Conservative leader of Kensington and Chelsea Council, who said: “We are finding a lot of our businesses are squeaky about it.

“They’re not saying that people aren’t coming to London. They’re just saying, certainly for the upmarket stuff, that they’re going to Paris more – or they’re going to Paris, but then not extending their trip to London, because they’ve already done their tax-free shopping.”

Rowley, who is parliamentary under-secretary for local government, told his fellow panel members: “I’m so sorry to be a politician, but as I know you know, the decisions about that are made by the chancellor.

“We’re totally aware of it, and I will ensure that from this conversation, it is fed in once again.”

Last year, Liz Truss’s chancellor Kwasi Kwarteng announced the reintroduction of VAT-free shopping as part of his mini-budget. Jeremy Hunt reversed the decision when he took over from Mr Kwarteng, claiming it was unaffordable.

Muniya also called for changes to visas for tourists in the EU’s Schengen area, to enable London to benefit from international visitors during next year’s Paris Olympics.

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