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Anticipation for a reversal of the controversial “tourist tax” in the upcoming spring budget is dwindling, with warnings from the financial secretary to the Treasury highlighting the complexities involved in such a move.
Nigel Huddleston, the minister overseeing the tax system, emphasized the challenges of reinstating the previous system, particularly in light of the UK’s departure from the EU. In correspondence seen by The Times, Huddleston noted the necessity for any new scheme to accommodate visitors from both the EU and the rest of the world, underscoring the legislative and implementation hurdles involved.
Huddleston’s letter also cited the chancellor’s emphasis on fiscal responsibility, suggesting that alternative measures, such as a VAT-free shopping scheme, could potentially stimulate tourist spending without the need for tax relief.
The decision to scrap the tax-free shopping scheme in 2021 by then-Chancellor Rishi Sunak has been subject to scrutiny, prompting current Chancellor Jeremy Hunt to commission a review into the matter. Reports indicate that the Office for Budget Responsibility has been tasked with reassessing the financial implications of reinstating the scheme, with findings expected to be released alongside the spring budget.
Despite growing calls from business leaders for the scheme’s reinstatement, insiders suggest that the Treasury remains steadfast in its position, awaiting the OBR’s evaluation before making a final decision. Political considerations, including reluctance from Prime Minister Jeremy Hunt to concede to personal oversight during his tenure as chancellor, may further complicate the issue.
Business advocates, including Tom Ironside of the British Retail Consortium, lament the missed opportunity for economic stimulation through tax-free shopping, highlighting the potential benefits for tourism and job creation.
Sacha Zackariya, CEO of ChangeGroup and Prosegur Change, urged swift action to reinstate the scheme, emphasizing its role in attracting tourists and bolstering the economy, particularly amidst events like the Paris Olympics.
Sir Rocco Forte, a prominent hotelier who spearheaded calls for tax-free shopping reinstatement, sees Brexit as an opportunity to extend the scheme to a broader market, including the EU’s 500 million shoppers. He asserts that swift legislative action could garner support from the business community and enhance the budget’s impact.
