The International Retail Association has put forward its proposals for the reintroduction of a duty-free shopping system in the UK, stating that “the situation and facts have changed”.
The plan was scrapped in 2021 following Brexit, and in September 2022, then-UK Chancellor Kwasi Kwarteng confirmed plans to reintroduce duty-free shopping for overseas visitors. as part of their damned “mini budget”.
But this was quickly ruled out by his replacement Jeremy Hunt.who said that “not going ahead with this plan is worth around £2 billion a year”.
Ahead of this week's Spring Budget, AIR said: “Evidence of actual spending by non-EU visitors to Europe in 2022 shows a loss of spending of £1.5bn as a result of the end of free shopping of taxes”, adding that “the evidence of British people shopping duty-free in the EU suggests that Britain is missing out on a new £10 billion single market that would not be so centered in London.”
The association said reintroducing duty-free shopping would “reverse the growing diversion of spending by non-EU visitors from Britain towards continental Europe, as evidenced by all data on actual spending levels”.
“Many international visitors to Europe go on multi-country tours and all evidence shows they are choosing to buy more outside the UK as they realize they cannot reclaim VAT on purchases made in Britain,” he added.
In November, AIR presented evidence to the Treasury which it said showed that in 2022, spending by non-EU visitors in continental Europe rose to 198 per cent of 2019 levels, but fell 28 per cent from to 2019 levels in Great Britain.
The association said early indications suggest the situation worsened in 2023 and will continue to worsen in 2024, “as highly price-sensitive Chinese visitors, the biggest spenders in the world, reduce their spending in the UK by almost 70 percent, which represents an additional expense. £700m loss for British stores.”
The AIR concluded that “all the evidence on actual spending levels is consistent in showing that the Treasury's initial assumption that duty-free shopping had no impact on international visitor spending is not correct”, and urged the government to reintroduce the plan.
The presentation continues open letter from last week – signed by organizations including the Scottish Chambers of Commerce, Heathrow and the Federation of Small Businesses – which again urged the government to “introduce a new, internationally competitive, duty-free shopping scheme for international visitors in the Spring Budget”.
The letter said the removal of duty-free shopping “has had a negative impact on business income in Scotland and, for some, forced us to reduce operations, take steps to reduce our footprint in the UK and mitigate the impact in supply chains.
In August last year, a report by the Center for Economic and Business Research (CEBR) showed what it said were the “clear economic benefits associated with a VAT refund scheme” and concluded that the scrapping of the scheme is having the effect of deter two million tourists a year, resulting in an annual GDP loss of £10.7 billion.
New report shows UK's scrapping of duty-free shopping deters two million tourists a year
