Would You like a feature Interview?
All Interviews are 100% FREE of Charge
Jeremy Hunt has been urged to boost retail and hospitality industries by abolishing the so-called tourist tax in the Budget.
Hopes have been raised that VAT-free shipping for tourists could be reinstated after it emerged the Chancellor ordered a review of the cost and benefits.
The Treasury previously claimed reinstating the perk for tourists could cost £2bn a year.
But the Chancellor has ordered a review of the calculations, due to be published alongside his Budget in March.
Richard Hughes, chair of Office for Budget Responsibility (OBR), confirmed in a letter sent in December that the body was reviewing the figures – including the Treasury’s estimate of the cost.
The UK had a tax-free shopping scheme as an EU member. Retailers have argued in favour of bringing it back and said that it incentivises tourists coming to the UK to shop.
But the Government has argued that such a scheme would come with significant costs with no direct benefit to UK taxpayers.
Mr Hunt has come under repeated pressure from businesses who argue that reinstating VAT-free shopping could boost the economy rather than harm it.
The latest group to urge him to look again at the policy has suggested ending it would increase tourism and add £1.5bn to the UK economy.
The British Chambers of Commerce (BCC) and Federation for Small Businesses (FSB) have launched a campaign, with Heathrow Airport Limited, urging the Chancellor to introduce tax-free shopping for international visitors.
Business leaders will meet on Monday to discuss proposed tax changes which, they argue, would boost retail, hospitality and manufacturing sectors.
The Association for International Retail (AIR) said the retail industry was losing £1.5bn a year as international visitors choose to visit and shop in tax-free shopping destinations.
Shevaun Haviland, Director-General of the BCC, said businesses were “feeling the impact of the UK being the only major European country not to offer tax free shopping”.
Changing this would “help foster inward investment and growth across the visitor economy, which will strengthen our supply chains and drive economic activity in all regions and businesses throughout the UK”.
Tina McKenzie, Policy Chair at the FSB, said the change would “attract high-spending visitors back to our quality retail sector, as well as producing a much-needed secondary spend with shoppers visiting restaurants, bars and hotels”.
She said it would help sectors struggling with higher costs: “Adding in the extra supply chain opportunities for small businesses across the UK, bringing back tax-free shopping would give a clear signal that the UK is open for business.”
The Treasury would not comment on the upcoming Budget. A spokesperson said the Government would “keep all taxes under review and recognise the value that retailers bring to Britain” and added: “That is why we announced a £4.3 billion business rates package at Autumn Statement to support businesses and the high street.
“VAT-free shopping remains available for all non-UK visitors buying items in store and having them sent directly to their overseas address.”