Scrapping Tax-Free Shopping Is Costing Britain $14 Billion In Lost GDP, Says Report

01-08-23

A new report, released Monday, says that the removal of tax-free shopping in the U.K.—brought about by Rishi Sunak when he was chancellor and who is now prime minister—is costing the country £10.7 billion ($14 billion) and deterring two million tourists a year from visiting.

At the time of the ban on what was effectively a VAT refund scheme for tourists taking goods out of the country, the government said the perk was not necessarily used as intended. It claimed that at airports “the tax concession is not always passed on to consumers” while downtown, some tax-rebated goods were brought back into the U.K.

Sources familiar with VAT-refund schemes also said that the one in place in Britain was unnecessarily complex and costly to administer, and was another reason it was dumped. Whatever the reasons, it is becoming more apparent that the sums don’t add up.

The report from the Centre for Economics and Business Research (CEBR) claims that the additional revenue generated by restoring a VAT rebate scheme would outweigh losses associated with VAT refunds by £2.3 billion ($3 billion). For every £1 refunded in sales tax to foreign tourists, the U.K. treasury would gain £1.56 in other taxes thanks to the nature of tourist expenditure.