Hunt warned ‘tourist tax’ could spark loss of more than 100,000 jobs
A CONTROVERSIAL ‘tourist tax’ on foreign visitors imposed by Chancellor Jeremy Hunt could mean the loss of more than 100,000 jobs, according to an in-depth analysis shown to the Government.
The levy could also mean that Britain forfeits up to £6billion in tourist spending to other countries, particularly in Europe where overseas travellers are offered tax incentives to spend in shops.
Bosses at Harrods and Selfridges have joined a chorus of business leaders demanding a review of Mr Hunt’s decision to scrap VAT-free shopping for international visitors.
They say it puts London at a serious disadvantage to rival cities, including Paris and Madrid which are said to be targeting visitors from outside the European Union – including Britain – by promoting the incentive at airports and shopping destinations. Tourists from overseas were allowed to reclaim the 20 per cent VAT on their purchases in the UK – until January 2021, when the tax break was scrapped by then Chancellor Rishi Sunak.
Last September, Kwasi Kwarteng made moves to reintroduce the incentive in his disastrous ‘mini-Budget’. A month later, Mr Hunt reversed the plan, hoping that his decision will boost the nation’s tax haul by £2billion a year.
Critics have branded his plan as a ‘tourist tax’.
The Mail on Sunday has learnt that a host of business leaders met representatives from the Treasury and HMRC late last month to raise concerns. They warned that highspending Chinese, Middle Eastern and American tourists are already choosing to spend more in mainland Europe.
Officials were also shown adverts on display across European transport hubs encouraging UK holidaymakers to shop in foreign cities where they can receive the tax discount.
Businesses said this demonstrated ‘the pull that discounted shopping has’.
One of those in attendance said: ‘The UK desperately needs this tourist spend, given the negative economic impacts of Covid debt.’
An analysis by the respected Centre for Economics and Business Research – which suggests up to 138,000 job losses in its worst-case forecast – claims the Treasury’s calculations are too optimistic and narrow in scope. It said that even under cautious estimates, the ‘tourist tax’ change could result in more than 40,000 job losses.
It is understood the report was aired last year during a legal case when it challenged assumptions made by HMRC and warned the removal of VAT-free shopping would cause ‘substantial harm’.
The study said lost tax revenues could amount to as much as £3.5billion if the wider impact of the lost spending, jobs and output from industries associated with the tourist sector were added.
The report says that offering the incentive would be a boon to shops and the UK tourist industry.
In contrast, it added, removal of the incentive ‘would exacerbate both sectors’ problems significantly’ as they struggle to recover from Covid-19 losses.