Tax-free shopping for tourists 'could provide £10b boost to economy'

The reintroduction of tax-free shopping for tourists could provide a £10b boost to the economy, according to a report from the Centre for Economics and Business Research (CEBR).

The study commissioned by the Daily Mail and Sir Rocco Forte, owner of Rocco Forte Hotels, also found that reinstating VAT rebates could fuel the creation of new jobs and provide an extra £2b for treasury coffers.

Hoteliers have campaigned for the reintroduction of tax-free shopping since the Treasury withdrew from the VAT retail export scheme in January 2021 following Brexit, expressing concerns that tourists are "bypassing" the UK for destinations offering the rebate.

In April Sir Rocco told The Caterer that tourists were "increasingly voting with their feet".

He continued: "I am seeing this in my own hotel group, where business in Europe has rebounded more strongly post-Covid than it has in the UK. Paris, Berlin and Milan are rubbing their hands with glee at our stupidity."

The CEBR report estimated that spending eligible for the visitor rebate stood at £6.6b in 2022, around £1.1b of which would have qualified to be returned to visitors.

Accordingly, the VAT refund scheme could reduce the cost of a trip to the UK by 4.2%, which the CEBR estimates could see a tourism boost of some 1.7 million visitors.

The report stated: “We estimate that a fully utilised tax-free shopping scheme could have increased GDP by £9.1 billion in 2022. Applying this figure to 2023's projections, a tax-free shopping scheme could have boosted the size of the economy by £10.7 billion.”

Applying these findings, the CEBR found the initial cost to the treasury in lost taxes would be outweighed by the increase in spending and boost to the wider economy.

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