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Shaftesbury supports NWEC’s call on Government to reverse the decision to abolish tax-free shopping in the UK for all countries

As an associate member of New West End Company (NWEC), we actively support the call on Government to reverse the decision to abolish tax-free shopping in the UK as a matter of urgency. The decision to abolish tax-free shopping will leave London trailing behind its European counterparts as a destination for tourists who are attracted to the vibrancy and variety of retail that London has to offer, at a time when London tourism needs every possible support.

We are writing to the Chancellor to seek urgent action and continue to do everything we can to support businesses across our portfolio. We will also do all we can to assist NWEC in its efforts to seek greater Government support for the West End community.

NWEC’s call on Government:

Aims

To reverse the Government decision to abolish tax-free shopping in the UK for all countries

Key proof points

  • British businesses are dismayed at the Treasury’s surprise decision to end the tax-free shopping scheme.  This is a massive blow to the UK economy. Britain will now be the only country in Europe not to offer tax free shopping to international visitors. The Government is effectively telling international tourists, particularly those from the Middle East and Far East, for whom shopping is a major draw, to go everywhere else but the UK to spend their money.
  • The decision changes a potential £2.1 billion tax free shopping bonus from the UK’s departure from the EU into a £3.5[1] billion loss of tax-free sales. This is a £5.6 billion hit on the UK economy, before accounting for the negative knock-on effect on wider international tourism spending, at a time when retail and tourism across the UK are already reeling from the impact of COVID-19. 
  • This decision has massive negative implications for Britain’s tourism industry, hitting hotels, restaurants and cultural attractions across the whole of the UK as high-spending tourists instead choose to go to Paris, Rome or indeed any European country other than the UK to spend their money. The decision will clearly damage the Government’s ambitions for a Global Britain.
  • After December 31 2020 UK citizens will be encouraged to travel to Europe where they will be able to shop tax free in every country, rather than spend in the UK.  And Britain has decided not to reciprocate
  • Not only will the Treasury save nothing, but the inevitable fall in international tourist numbers and spending in the UK will reduce all other VAT income (total annual spending by international visitors is over £22 billion, of which only 10% is on tax free shopping)
  • We cannot express strongly enough the devastating impact this decision will have on the UK’s international tourism and retail industries.
  • It does not seem right that such a momentous decision should be made on the basis of a one-sentence question in a 22-page consultation, which focussed mainly on duty free issues. We are therefore taking legal advice on how best to examine the process and briefings that led to this decision.

[1] Total registered annual tax-free sales in the UK are £3.5 billion but the reclaim rate is around 65% (due to the failure of HMRC to digitalise the validation system). So, VAT is only actually reclaimed on only £2.5 billion.