Tourist tax means tills aren’t ringing as loudly this Christmas

Anybody walking through central London this month will see tourists from all over the globe taking in the Christmas lights amid the sound of bells jingling. But the tills are not ringing as much as they should be.

At a time when the UK economy is stuck in a low-growth rut, we should be pulling out all the stops to attract high-spending visitors and maximise the capital’s attractiveness to overseas tourism.

Perversely, we are doing the opposite.

The Government inexplicably scrapped tax-free shopping on goods for international visitors in 2021.

This present to our European competitors was eagerly accepted: France now accounts for 46 per cent of all tax-free sales in Europe, up from 30 per cent in 2020.

Losing out: Figures from Global Blue show that 10% of UK spending by international shoppers in 2019 has now moved to EU countries

And figures from Global Blue show that 10pc of UK spending by international shoppers in 2019 has now moved to EU countries, which all offer VAT-free shopping.

International visitors here effectively pay around 20 per cent more for the same goods they can buy elsewhere. And buy elsewhere they do – in Paris, Milan and other cities.

Not only does this mean that British retailers lose out, but the Exchequer misses out on the VAT from additional spending on hotels, restaurants and theatres.

Economists at the Centre for Economics and Business Research estimate that the tax is costing the UK £10.7billion in lost GDP and putting off 2m travellers from visiting each year.

British retailers also say that London is losing out as a shopping hub to cities which offer VAT-free shopping.

Organisations that represent around 1.5m employees across the country recently signed a BusinessLDN letter urging the Chancellor to abolish the tourist tax.

The impact of the tax is felt right across the country and not just in London’s world-leading shops, hotels, restaurants and attractions. Other cities are missing out and supply chains also suffer as a result.

Mulberry closed its Bond Street store in London this year: around half its bags are made in Somerset.

Evidence shows that international visitors typically buy more British goods when they visit the capital, so the fact they are increasingly choosing to spend in other countries hits the whole UK supply chain.

The additional spending from reintroducing VAT-free shopping on goods for international visitors would deliver a significant net increase in tax revenues.

It would also support tens of thousands of jobs across the country: 78,000 of them, according to Oxford Economics.

London’s status as a driver for UK tourism is demonstrated by the scale of its contribution to the economy.

Visit Britain data shows that there were 16.1m in-bound visits to London in 2022 compared with 13.2m visits to the rest of England in 2022.

The capital acts as a gateway for trips to other parts of the UK, supporting growth and jobs. Next year we stand to miss out on the benefits of the nearby Paris Olympics. Euromonitor International forecasts the Paris Games will create up to 3m additional visitors in Paris.

We should be doing everything we can to encourage them across the Channel to spend here, not deterring them.

This also means making sure that proposed changes by the EU requiring more data to be gathered at border checkpoints, such as Eurostar at St Pancras, are implemented in a way that does not cause lengthy delays.

It is also important that the current rhetoric on immigration does not create an impression that the UK has shut its doors to overseas visitors.

International tourism is a major asset for our economy but the extra VAT on goods is encouraging our Christmas visitors to keep their hands in their pockets.

All is not lost. By restoring the scheme, the Chancellor can enhance the Government’s ambition to place growth at the heart of Britain’s economy.

We must make this the last Christmas when the tourist tax damages the UK’s economic interests.

It should not just be bells that are ringing in future.

This post first appeared on Dailymail.co.uk