London’s biggest property companies today piled the pressure on Jeremy Hunt to restore VAT free shopping for foreign tourists in his Autumn Statement later this month.
The London Property Alliance (LPA) which represents over 400 developers, investors and advisers across central London, said the capital is losing ground at an alarming rate to its biggest rival European cities as a result of the so called “tourist tax”.
It cited research showing that while the number of visitors from the Gulf to Bond Street, Regent’s Street and Oxford Street is up 1% compared with 2022 their spending is down 17%.
The LPA has called for the Office for Budget Responsibility to launch a full analysis of the economic impact of restoring tax-free shopping, which was axed by Rishi Sunak when he was chancellor in 2021.
The LPA’s chief executive Charles Begley said: “Central London supports over three million jobs, is home to innovative and world-leading business clusters and generates almost a quarter of England’s total business rates income.
“But we face a variety of urgent challenges which puts London at a significant disadvantage to our European peers. The success of central London should never be taken for granted and we need a growth plan to enable the UK capital to fulfil its economic potential as a global city.
“The reinstatement of tax-free shopping is an easy lever for the Chancellor to pull, which alongside longer-term measures to unlock complex retrofit projects, devolve more fiscal powers to local government and reform of business rates will help ensure London retains its position as a leading, sustainable global city.”
Before it was abolished the duty free perk allowed tourists from outside the EU to claim back their VAT on goods bought in the UK, making them 20% cheaper.
The implementation of Brexit means that EU visitors would have been entitled to the same benefit. The Treasury has argued this would cost up to £2 billion a year in lost taxes, would mainly benefit central London and was only used by around one in 10 eligible visitors before it was abolished.
Mairéad Warren de Búrca, head of indirect tax at London consultants Alvarez & Marsal, said: “If the Chancellor is looking for an easy way to boost growth, he should look no further than reintroducing tax-free shopping for international visitors.
“The VAT discount is already in place across Europe, meaning British retailers are losing out in the race to attract big-spending international tourists.”
She added: “Reimplementing tax-free shopping, even if it has restrictions for EU citizens, would be a win-win for Government and the retail sector. It would be very easy to implement for the Treasury and there are no real obvious downsides to the retail sector.”
