Retail bosses warned the government about the impact of its decision to not restore VAT free shopping by foreign tourists on other industries.
The manager of the O2, a venue for entertainment in Southeast London, accused the Treasury of failing to consider the impact that the scrapping of the scheme would have on UK hotels, pubs, and restaurants.
Janine Constantin Russell, the managing director said: “The Government isn’t even listening.” The government is focusing on the costs instead of how much money a tourist will spend in the hospitality industry. Not just luxury brands, but all destinations and attractions are affected.
We’re asked to conduct business with our hands behind our backs. We have to work harder to convince tourists to visit the UK, as they know that they can get discounts elsewhere such as France and Italy.”
Rishi Sunak, when he served as chancellor in 2021, canceled the tax-free scheme that allowed international shoppers to claim 20 per cent of their VAT.
Jeremy Hunt, chancellor of the United Kingdom, has ordered a review to be conducted by the Office for Budget Responsibility. This was in response to hundreds of business leaders calling for it’s reversal. He decided to keep the “tourist taxes” after the OBR determined that the estimates made in 2020 which were used to influence the original decision to scrap VAT free shopping “still seem reasonable”. The OBR had estimated that the cost of restoring VAT-free purchases would be £2 billion.
Constantin-Russell claimed that the government gave businesses false hope: “We thought we would be listened to, but then were told overnight it was too costly to reinstate.” The government just seems to keep passing that piece of paper around from one office to another.
Michael Ward, the managing director of Harrods was worried that Labour would not support VAT-free shopping
Michael Ward, managing director of Harrods – the luxury department store – said that he too was disappointed that the industry had not been listened to and that he does not anticipate the scheme being reinstated anytime soon. “Is Sunak going to admit, before a possible election, that he [wrongly] messed up the VAT system?” I’m not a politician but I don’t think that is likely.
He added: “And then you have the second issue, which is whether the Labour government will do it?” At this time, it’s just not on the agenda.
Ward suggested that the UK government allow third-party providers, like Global Blue or Planet to operate a new tax rebate scheme for UK tourists. He said that ideally, the government should allow third-party providers to run a new tax refund scheme for tourists in the UK. “That’s the best way to do it.”