UK retailers are renewing efforts to persuade Chancellor of the Exchequer Rachel Reeves to bring back tax-free shopping for tourists , as the government prepares to set out its plan to boost the so-called visitor economy.Making purchases exempt from VAT could result in £3.65 billion ($4.9 billion) of additional spending by visitors from the European Union, the Association of International Retail said in a submission to ministers published Tuesday. That’s on top of about £1.5 billion of spending by non-EU visitors the lobby group said was diverted from the UK when it scrapped tax-free shopping in 2021.The report sent to the Department for Culture, Media and Sport is the latest salvo in a long tussle between retailers and the government. Then Chancellor of the Exchequer Rishi Sunak used the UK’s exit from the EU as a chance to end a system that let travelers reclaim the 20% VAT sales tax on their purchases.Since then, Conservative and Labour governments — with the exception of the short-lived administration of former Prime Minister Liz Truss — agreed with Sunak’s assessment that the policy cost the Treasury more than it gained. Subsequent analysis by the Office for Budget Responsibility backed that view.Reeves faces a fiscal shortfall heading into this year’s autumn budget, after expensive U-turns on welfare cuts and amid reduced prospects for growth. It also cited figures showing visitor spending in the UK was 92% of 2019 levels last year, compared with 106% in Spain and 110% in France.
