According to the latest figures, wealthy overseas shoppers are avoiding Britain due to the “tourist tax” imposed by the Chancellor at the time, Rishi Sunak. In 2020, he abolished VAT-free

purchases for tourists, which allowed them to claim back 20% of the price of goods. As a result, tourists are choosing to spend their money in other European cities, with spending in Britain only reaching two-thirds of pre-pandemic levels. Italy and Spain are on the brink of returning to 2019 levels of tourist spending, while France has already surpassed them.

Head of the Association of International Retail (AIR), Paul Barnes, claims that other cities are “rubbing their hands with glee” over these figures. American and Middle Eastern tourists, in particular, have doubled the amount they spend in Paris. In comparison, spending by US visitors in the UK has only recently reached pre-Covid levels. Visitors from countries such as the United Arab Emirates are spending a third less in the UK than they were before the pandemic.

In the UK, tourists can buy VAT-free goods, but only if they have them delivered to an overseas address. Mr Barnes stated that “people who used to come to the UK from the US and the Gulf are shunning Britain” and that they may be coming to look around but not spending their money. Therefore, the Treasury is hindering the country’s productivity.

A survey conducted by Global Blue of 10,000 Chinese people who visited Europe for tax-free shopping in 2019 showed that the UK is the least popular major European destination. The owner of designer outlet shopping centre Bicester Village in Oxfordshire, which is popular with Chinese tourists, commented that “other countries with a more competitive tax system have been benefiting from increased tourist spending at this country’s expense”.

Harrods’ boss, Michael Ward, also claims that the UK’s hotels and restaurants are missing out on tourists’ cash. In contrast, the Chancellor at the time, Jeremy Hunt, claimed that the decision to scrap VAT-free purchases would be worth £2 billion per year. A Treasury spokesman countered that “tax-free shopping is still available for all non-UK visitors who purchase items in store and have them sent directly to their overseas address.”

In conclusion, the decision to scrap VAT-free purchases for tourists in the UK has led to a significant decrease in tourist spending. Italy, Spain, and France are experiencing a return to pre-pandemic levels, while the UK’s spending remains at only two-thirds of what it was. Visitors from the US and the Gulf are choosing to spend their money elsewhere, with the UK being the least popular major European destination for tax-free shopping. Other countries with a more competitive tax system are benefiting from the UK’s lack of tax-free shopping, causing the UK’s hotels and restaurants to miss out on tourists’ money. Photo by Chiugoran, Wikimedia commons.