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Chancellor under fire

Sunak attacked for axeing tax-free benefit for visitors

Multrees Walk, shop, retail, Edinburgh

Shops fear they will lose extra trade from visitors (pic: Terry Murden)

The Chancellor Rishi Sunak is facing a Commons backlash today for going ahead with his plan to deny tax-free shopping to overseas visitors to the UK.

Currently they can claim a VAT refund on items bought in the UK and tax-free sales at UK airports – at the same time earning millions for British retailers and safeguarding jobs.

The Treasury has confirmed that it intends to withdraw the VAT Retail Export Scheme (RES) and airside Extra-Statutory Concession (ESC) to non-EU visitors from 1 January.

Retailers, MPs and aviation leaders have criticised the decision which they say will hand billions of pounds of sales to Britain’s European rivals. France and Ireland have already lowered their tax-free thresholds to capitalise on the decision.

London Heathrow airport is taking the issue to the High Court as part of a judicial review. John Holland-Kaye, the chief executive of Heathrow, said: “Brexit was meant to be about taking back control to make the UK more competitive. The tourist tax will do just the opposite. The French can’t believe their luck.”

Les Echos – a French financial paper – asked bluntly why the UK government was “shooting itself in the foot in terms of competitiveness, at the very moment when France is preparing to extend its tax refund?”  

Business leaders in Scotland – including the Scottish Chambers of Commerce and the Scottish Retail Consortium – warned that the pandemic has been “hugely challenging” for businesses and that they are “deeply concerned” at the decision to abolish the VAT-free schemes.

A dozen Conservative MPs have supported a motion to quash the change in a debate on the future of the high street in Westminster today (Thursday).

The SNP’s Business and Industry spokesman Richard Thomson echoed concerns raised by business leaders who warned that around 40,000 jobs in the UK and around £1bn worth of investment could be at risk as a result of the move.

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Mr Thomson said:  “We have already seen this year the devastating toll the coronavirus pandemic has taken on businesses across Scotland and the UK – with tens of thousands of job losses and businesses pulling down their shutters.

“At this critical time, it is an act of economic recklessness that the Chancellor intends to plough ahead with plans to scrap VAT-free shopping for overseas visitors.

“Tourism is a vital part of Scotland’s economy and these plans will do nothing less than push many retailers to the brink.”

The Government says the move will save the taxpayer £1 billion a year.



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