Major poll debunks myth that abolishing tourist tax would cost millions
A major survey of tourists carried out before the Treasury’s decision to abolish VAT-free shopping found that the scheme was hugely popular with overseas visitors and that much of the money saved was being spent in the UK.
The findings of the confidential inquiry, carried out on behalf of HMRC, challenge the government’s argument that scrapping the ‘tourist tax’ would cost billions and have little impact on the number of people holidaying in London and the UK make.
The online survey of nearly 800 travelers from China, India and the US was conducted in June 2020, just three months before then-Chancellor Rishi Sunak announced the perk would end on December 31 of the same year as new Brexit rules came into force in entered into force.
The decision made shopping in the UK 20 per cent more expensive for foreign visitors and has been blamed for the lack of spending tourists in the capital. The study – a copy of which was provided to the Evening Standard – found that 67 per cent of respondents said the availability of tax-free shopping influenced their decision to come to the UK, with 57 per cent of respondents giving the level of influence a 9 or 10 on a scale of 1 to 10. Nearly two-thirds also said they spent more during their visit because of the opportunity to shop tax-free.
Of those who said they had bought more, the average over-spent was £3,400, with 10% saying they had spent at least an extra £10,000. When asked what they spent the money they saved on, just over half said “all in the UK”. The survey concluded that VAT-free shopping “encourages tourists to spend more in the UK” and that “most spend some or all of their savings in the UK, with a small proportion of this going into hospitality and entertainment services and other spending flows in retail.” .”
The research was conducted as part of plans to digitize the VAT reclaim process. This only came to light because a finding was referenced in a “Mythbuster” briefing sent by the Treasury to Tory MPs in October 2020. That meant the Treasury was forced to disclose the survey in a judicial review of the VAT abolition decision. Free shopping in January 2021. In the document, the Treasury stressed: “Tourists visit the UK for a number of reasons, the main motivator being cultural attractions. Tax-free shopping is not even on the list of reasons to visit the UK.”
The Association of International Retail said: “The Treasury has either dismissed or ignored any evidence from business that suggests its projections on the impact of the abolition of tax-free shopping may be wrong.” Trupti Shah of the historic Burlington Arcade in Mayfair said the reintroduction of VAT-free shopping would benefit London and the UK as a whole.
However, a Treasury spokesman said: “VAT-free shopping does not benefit Brits directly.”
They added: “We continue to support brick-and-mortar retailers by reducing business fees by 75 per cent, helping with energy bills and effectively reducing corporation tax by £27billion through full cost accounting.”
The Office for Budget Responsibility has said that reintroducing tax-free shopping for foreign visitors would cost £2billion a year, even allowing for other economic impacts.
However, a Treasury source added that the chancellor is “open to getting data if people think it’s wrong”.
https://www.standard.co.uk/news/politics/tourist-tax-cost-millions-myth-hmrc-survey-foreign-visitors-spending-uk-b1082327.html Major poll debunks myth that abolishing tourist tax would cost millions