Companies Lobby To Drop Shopping ‘Travel Tax’ as Tourists Choose EU

Companies Lobby To Drop Shopping ‘Travel Tax’ as Tourists Choose EU

Tax-free shopping is one of the benefits of travelling abroad. This encourages tourism and boosts local economies by attracting foreign shoppers. 

This benefit expired in the United Kingdom when the country exited the EU in December 2020. Previously, travellers from non-EU countries were eligible for the incentive. Non-EU visitors used to be able to present a VAT receipt at the airport to claim their refund. 

Furthermore, these tourists are now compelled to pay a 20% tax on products purchased in the United Kingdom. 

As a result, brands have been feeling the pressure. Many UK companies, particularly those in the luxury goods category, have seen sales declines and have shut local storefronts.

The VAT paid by visitors to the UK is different from how tourist tax works in other cities. For example, Manchester introduced a tourist tax in April, which charges visitors to the city £1 per night for hotels and similar accommodation. The aim is to raise millions of pounds for the council, and the money could be used to boost the tourism economy.

Outweigh Losses

A recent study by the Centre for Economics and Business Research (CEBR) has revealed that the “tourist tax” is costing the UK £10.7 billion in lost GDP and putting off two million tourists from visiting each year.

The study also found that restoring VAT-free shopping for tourists would create more sales than offset the losses.

Many EU countries have similar schemes for non-EU tourists. These include popular destinations like France, Italy, Spain, and Germany.

Now 350 businesses have sent an open letter to the Chancellor, Jeremy Hunt, asking for the situation to be addressed, highlighting the fact that tourists are choosing to travel to and spend their money in cities that don’t have the indirect “tourist tax”.

On September 7, a debate will be held at Westminster to determine whether the current retail hurdles will persist.

What are your thoughts on this issue? Talk to us in the comment section below. Or if you need more advice on the above, contact us for further travel & immigration advice.

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