Tourism chiefs call on Reeves to reinstate VAT-free shopping and boost growth

Tourism bosses have urged Rachel Reeves to reinstate VAT-free shopping to boost the Treasury’s coffers.

In a letter to the Chancellor of the Exchequer seen by The Mail on Sunday, they have asked him to scrap what has been dubbed the “tourist tax” to attract more overseas visitors to the UK.

The tax costs billions each year, economists say, as shopping tourists spend on hotels, restaurants and theatre visits.

Tourism chiefs say scrapping the tax could help Reeves fill a £22bn “black hole” he says he has found in the public finances.

“The international tourism economy is not only a fast-growing sector but also contains an untapped annual fiscal bonus of £4.5 billion… which could form part of your answer to this fiscal problem,” the letter says.

“This tax is not only damaging Britain’s position as a global destination, it is also costing the economy around £11.5 billion in lost spend every year,” added the letter, signed by the heads of UK Inbound Tourism, the Tourism Alliance and the Association of International Retail.

They represent hundreds of members including Airbnb, Bicester Village shopping centre and Titanic Belfast.

It is the latest call to scrap the tax and reinforces the views of hundreds of other companies, including Victoria Beckham and Marks & Spencer.

Hotelier Sir Rocco Forte, who led a campaign to scrap the tax that was backed by more than 500 business leaders, said keeping it would make a “complete mockery” of Labour’s growth promises.

When he was chancellor in 2021, former prime minister Rishi Sunak scrapped tax-free shopping for international visitors.

His conservative government refused to reverse the policy when he became prime minister.

The letter argues that previous Treasury forecasts used to justify the tax should be re-examined as they failed to take into account that EU tourists could spend much more in the UK if the policy was scrapped.

Businesses want Labour to at least launch a formal review of the tax.