Tourists ‘will abandon Britain if the Chancellor scraps duty-free shopping’ as watchdog warns it will raise only £195m in the first year – £300m less than original estimates
- Office for Budget Responsibility warns plans based on highly uncertain estimate
- It predicts it will make UK ‘less attractive for tourists’ compared to Paris or Milan
- Treasury said that from January 1, tax savings only apply to alcohol and tobacco
Tourists will abandon Britain if the Chancellor scraps duty-free shopping, the Government’s economic watchdog has warned.
The Office for Budget Responsibility (OBR) also says the decision will raise only £195 million in the first year – £300 million less than original estimates.
It warns that the plans are based on a ‘highly uncertain estimate’ of how visitors will react to the changes, and predicts it will make the UK ‘less attractive for affected tourists relative to alternative EU destinations such as Paris or Milan’.
Tourists will abandon Britain if the Chancellor scraps duty-free shopping, the Government’s economic watchdog has warned (pictured: Chancellor Rishi Sunak)
The Treasury has said that as of January 1, tax savings on goods bought by outbound travellers will apply only to alcohol and tobacco.
As part of the move, ministers are also abolishing the VAT rebate scheme for tourists, which will hit shopping centres across the country and put up to 70,000 jobs at risk.
The plans have attracted international ridicule, with French newspaper Les Echos accusing the Treasury of ‘shooting itself in the foot in terms of competitiveness’.
It emerged yesterday that the French National Assembly had appointed two officials to take advantage of the UK’s changes.
Their first move was to lower the amount visitors must spend to reclaim French VAT from €175 (£157) to €100 (£89).
More than 40 Tory MPs have pressured Rishi Sunak to rethink the decision and Heathrow Airport has launched a judicial review – the first time it has embarked on a legal challenge against the Government.
The Treasury insists the scheme mostly benefits London and does not support the Government’s levelling-up agenda. It has dismissed claims the changes will hurt the UK’s competitiveness.
The Treasury has said that as of January 1, tax savings on goods bought by outbound travellers will apply only to alcohol and tobacco (file image)
But the OBR report highlights the potential for ‘negative consequences’ as millions of visitors abandon the UK.
A spokesman for Heathrow said: ‘Failure to introduce a new tax-free shopping regime will jeopardise the Government’s ‘global Britain’ ambitions just as other European countries such as France and Ireland take the opposite approach to become more attractive to international visitors, in a post-Brexit world.
‘Brexit is meant to be about making the UK more competitive, and all eyes are on this Government to make a success of it. It will be an extremely worrying start if the Chancellor fails to recognise new figures and approaches others are choosing to ensure they remain attractive.
‘He must do all he can to steal a march on our European neighbours, not fall behind them.’
A spokesman for the UK Travel Retail Forum added: ‘The OBR’s analysis of the Treasury’s decision to remove airside tax-free sales shows the Treasury can expect to recover only a very minor amount of revenue – and almost certainly less than the combined economic impact travel retail could have had on the economy if tax-free sales had been extended to travellers after Brexit.’
The group has submitted several proposals to the Treasury that it believes ‘address the concerns raised by the Government, while giving airports and travel retailers the opportunity to recover from the pandemic and continue delivering this travel benefit to passengers’.