One of the few things Liz Truss won a round of applause for outside hardcore Tory ranks during her fleeting spell as Prime Minister was her decision to restore VAT-free shopping for overseas visitors to the UK. The arrangement, which had previously enabled them to get a refund of the tax on items bought while shopping during their trips, was dropped under Boris Johnson’s post-Brexit premiership for reasons including – as On London reported at the time – the arrangement being “largely centred on London”.
Truss’s plan to restore the tax relief fell apart as soon as her premiership did. And now Sadiq Khan and 30 London business leaders and organisations have joined forces to urge Chancellor Jeremy Hunt to do what Truss had intended by re-introducing what is officially called the VAT Retail Export Scheme in order to, in the words of the Mayor’s letter to Hunt, “help increase the number of international tourists who visit London and the United Kingdom which in turn will provide a much needed boost to businesses and high streets across the country”.
The letters signatories include City Corporation chair Chris Hayward, Kieron Williams, the leader of Southwark Council in his capacity as chair of the Central London Forward group, Charles Begley, chief executive of the London Property Alliance, Business LDN chief executive John Dickie and London Chamber of Commerce & Industry chief executive Richard Burge, who has warned that London risks losing “competitive advantage” over cities such as Paris and Milan and described the economic cost to the Uk as “minute” compared with “the overall economic gain of increased numbers of tourist spending more money in the UK, especially our capital”.
This Mayor’s letter describes London’s ability to attract overseas visitors as “vital not just to the capital but to the whole UK economy. London is the gateway to the rest of the UK, for example 40 per cent of international visitors to Scotland arrive via London and stay in London at the beginning or end of their trip”.
Khan also contests Hunt’s claim in his November 2022 financial statement that abandoning restoring VAT-free shopping would produce a saving of £2 billion a year, citing a recent Oxford Economics Study suggesting that the net effect of returning to the VAT-free arrangement would be “a net positive of £#50 million a year”. He asks Hunt to ask the Office for Budget Responsibility to undertake its own assessment “so that decisions can be made based on full and accurate information”. The Mayor also wrote to Hunt about the VAT issue before his statement last autumn.
Leaders of a number of central London business improvement district groups (BIDs) were also among the letter’s signatories, with Kay Buxton, chief executive of Marble Arch London BID, saying she feared Hunt had “missed a trick” last years by deciding not to reinstate VAT-free shopping, saying doing so would have made “a huge difference for not only the retail industry but for leisure and hospitality businesses as well”. Buxton added that analysis by the Association of International Retail had found that an additional 1.6 million visitors to the country in its first year had VAT-free shopping been brought back.
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