- Before 2021, foreign tourists could claim VAT refunds on items purchased in the UK
- Hundreds of Britain’s top retailers want ‘tourist tax’ scrapped
Britain has “closed the door on domestic growth” following the abolition of VAT-free shopping, Heathrow Airport has warned.
Europe’s busiest airport said UK exports were booming but warned the “tourist tax” was scaring away incoming travelers and damaging the country’s business environment.
It has now teamed up with the British Chambers of Commerce (BCC) and the Federation of Small Businesses (FSB) to campaign for “an internationally competitive duty-free shopping incentive” in the upcoming Spring Budget.
Stay away: Heathrow said UK exports were booming but warned the ‘tourist tax’ was scaring away inbound travelers and damaging the country’s business environment.
Hundreds of Britain’s leading retailers, businesses and other brands want the UK government to reinstate tax-free shopping, which Rishi Sunak abolished three years ago when he was Chancellor of the Exchequer.
Before early 2021, overseas tourists would be able to claim a VAT refund on items purchased but not consumed in the UK.
HM Treasury says reintroducing the benefit would cost the exchequer £1.3bn in the 2024/25 financial year, followed by £2bn the following year.
But a study by the Center for Economics and Business Research estimates the move would actually boost the economy by more than £10bn a year, while Oxford Economics says it would directly support around 78,000 jobs.
About a week ago, the fiscal watchdog, the Office for Budget Responsibility, announced it would begin a cost-benefit analysis of the tourist tax, raising hopes among business leaders that it could soon be abolished.
Heathrow said: “While exports are thriving, Britain has closed the door on domestic growth, turning away international buyers through the tourist tax and tarnishing the UK’s reputation as a competitive country to spend and do business in.”
The travel hub also revealed its latest monthly passenger statistics on Monday, showing 6 million traveled through the airport in January, a 9.4 percent increase from last year.
The numbers were just below pre-pandemic volumes, with trade supported by the continued recovery in travel to and from the European Union, North America and the Asia-Pacific regions.
Heathrow plans to serve 81.4 million people in 2024, although it also predicts its turnover and profits will decline because the Civil Aviation Authority will limit the amount the airport can charge airlines for each passenger they carry.
Despite widespread economic uncertainty, the air transportation industry is anticipating an excellent year ahead, including a strong summer.
Victoria Scholar, chief investment officer at Interactive Investor, said: “While cost-of-living pressures continue to hurt consumers amid rising prices and higher interest rates, it appears that individuals and families continue to prioritize travel. over other luxuries whenever possible. , even in the face of rising airfares.
“February will be the next major test for Heathrow as an indicator of demand during the normally busy half-term period following the post-Christmas seasonal lull.”