International tourists in London should receive a 20 per cent VAT refund on the cost of their shopping, Tory mayoral candidate Susan Hall said on Thursday.
She has written to Chancellor Jeremy Hunt to urge the so-called “tourist tax” to be scrapped to boost business in the capital and the wider UK economy.
The Standard has been campaigning for the reintroduction of VAT-free shopping for tourists, which was scrapped in 2021 by Rishi Sunak, the then chancellor, when Britain left the EU.
Ms Hall believes restoring the tax perk would boost the economy by £10.7bn and put London back on an even keel with other world cities, where tax-free shopping is offered to tourists.
In a rare criticism of the Tory Government, Ms Hall said: "London is a wonderful place for tourists and we should be rolling out the red carpet for anyone wanting to travel here and spend on our high streets.
“I fully support restoring VAT-free shopping for international visitors and I am standing up for Londoners and actively lobbying the chancellor for this."
Organisations such the CBI and BusinessLDN believing scrapping the tax could boost competitiveness. Mayor Sadiq Khan and Tory MP Paul Scully, when he was Minister for London, also support the reinstatement of the VAT refund.
Burberry’s chairman Gerry Murphy accused Mr Sunak of scoring a “spectacular own goal” by making the UK the “least attractive” shopping destination in Europe.
But the Treasury has argued that keeping VAT free shopping after Brexit, when it would have been extended to EU shoppers, would have cost £2 billion a year in lost tax revenue by 2026.
Ms Hall, in her letter to Mr Hunt, pointed to research by the Centre for Economics and Business Research, which found that if the refund were restored than for every £1 refunded in sales tax to foreign tourists, the exchequer would gain £1.56 in other taxes due to the “dynamic economic effects” of tourist expenditure.
This would amount “to an increase in GDP of £10.7bn in 2023” and help support more than 200,000 jobs, she said.
She wrote: “The additional revenues generated would outweigh the losses associated with sales tax refunds by £2.3 billion in 2023.
“Not only is the policy holding back growth, but it is reducing the tax revenues for the Government.
“Every country in the EU offers tax-free shopping, while we don’t. Effectively, we have suddenly started charging 20 per cent more than other countries do for the same goods. We should be supporting our capital, ensuring it can compete and continue to be a first-tier destination for tourists.
“Whilst retail stores are affected directly, there has been a significant impact on hotels, hospitality venues and the cultural sector, many of which are still fighting for survival as a result of the pandemic.
“Many businesses in these sectors are heavily reliant on overseas tourists, particularly in London, but with the removal of tax-free shopping, many visitors are choosing our international competitors.
“It is clear that the removal of tax-free shopping is not in the best interest for London and the rest of the UK. I understand that there are pressures on the public finances at the present time. But the evidence shows that reinstating tax-free shopping would be a win for both business and the taxpayer.”
