Could the tide be starting to turn on the ‘Tourism Tax’?
City Comment: VAT-free shopping will be restored eventually — it’s just a matter of when
The bleeding of business from Bond Street to the Champs Elysées is unsustainable over the long term (Yui Mok/PA)
/ PA Archiveould it be the first vague hint of a change of heart? Trade minister Nigel Huddleston today asked for more “information and data” on the impact of the Treasury’s decision to remove VAT-free shopping for overseas visitors — the so-called tourism tax — when questioned about the subject today.
The Government has been under huge pressure on this issue — not least from the Evening Standard — and there is no doubt that central Londonbusinesses that depend heavily on high spending travellers are hurting, while in Paris, Milan and Madrid retailers and tourism bosses are rubbing their hands with glee.
My understanding is that within the Treasury there is a grudging acceptance that the policy — briefly reversed by Kwasi Kwarteng last September — is a huge own goal. But there are all sorts of political presentational issues that will make it hard to scrap.
VAT-free shopping mostly benefits high-end London businesses, not a good look for a Government pushing the levelling-up agenda. It would also represent a huge tax perk for EU visitors over domestic UK shoppers, a fact some of the Tories’ Brexiteer cheerleaders would find unpalatable. But something has to give.
The bleeding of business from Bond Street to the Champs Elysées is unsustainable over the long term, particularly at a time when Brexit is already deterring many potential visitors.
Ultimately economics will trump politics, as it nearly always does, and VAT free shopping will be restored. It is just a question of when. But I would be surprised to see it this side of the election.