The Treasury is reviewing the so-called ‘tourist tax’ on VAT-free shopping ahead of the spring Budget and could ditch the policy in a boost for retail.
Office for Budget Responsibility (OBR) staff are reportedly conducting an “examination of the costs and benefits” of Rishi Sunak’s 2020 move to end tax-free shopping schemes for tourists, according to The Sunday Times.
Then chancellor under Boris Johnson, Sunak ended the policy that allowed international travellers to the UK to reclaim the VAT they paid on luxury purchases.
The OBR has written to backbench Conservative MP Sir Geoffrey Clifton-Brown that they aim to publish its analysis and conclusions “alongside the spring Budget”.
OBR chair Richard Hughes said this is “[in] light of subsequent evidence on international visitor numbers [and] consumption patterns and the analysis carried out by a number of outside bodies”.
The news comes weeks before chancellor Jeremy Hunt will unveil his spring Budget on March 6 and is a hint that the Treasury could be set to reverse the VAT-free shopping policy following extensive campaigning by UK retailers.
In a joint article written in The Sunday Times by Heathrow Airport chief executive Thomas Woldbye, British Chambers of Commerce director Shevaun Haviland and Federation of Small Businesses leader Tina McKenzie, the three warned the government that the UK was losing its “hard-won reputation” as an international retail destination.