Government ‘looking again’ at tax-free shopping for tourists

The chancellor has said the Treasury is ‘looking again’ at its decision to scrap tax-free shopping for tourists, following campaigning by the hospitality and tourism sectors.

Hospitality leaders, including Sir Rocco Forte, owner of Rocco Forte Hotels, had warned that tourists were bypassing Britain since VAT refunds for overseas visitors were scrapped following a post-Brexit review of tax policy in 2021, under then chancellor Rishi Sunak.

Responding to a question from Conservative MP Sir Geoffrey Clifton-Brown, Jeremy Hunt said: “We want to do everything possible to make our tourism and our retail industry competitive and we want to encourage international visitors.

“When we changed policy on this particular issue a year ago, it was because the cost was around £2.5b a year and we didn’t think we could afford to continue doing it, but we are looking again at the numbers in the light of the most recent data and we can see what has happened to comparative shops in Paris and Milan, and we will review that and see if it is still that expensive, and I hope it isn’t.”

UKHospitality chief executive Kate Nicholls: “It’s positive that the government continues to look at the future of tax-free shopping. I would urge them to widen their focus and give consideration to the benefits of a lower rate of VAT for hospitality, which would deliver lower prices for consumers and drive business growth.”

Kwasi Kwarteng had announced plans to reintroduce tax-free shopping during his short-lived tenure as chancellor last year, but this announcement was reversed.

It is understood the government has drawn comparisons with the US, which does not have a country-wide VAT-free shopping system but remains a top destination for high-spending Chinese tourists.

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