When the newly appointed Chancellor, Jeremy Hunt, announced that he was abandoning almost all of the commitments in his predecessor's Growth Plan, only one of these lost policies was widely lamented. Cancelling the proposed introduction of tax-free shopping would, he told Parliament, save £2 billion each year. But nobody believes this is the true picture, not even the Treasury.
A new report from Oxford Economics, commissioned by the Association of International Retail (AIR) and released next week, takes a detailed look at the full impact of introducing the scheme. Far from costing the Treasury £2 billion a year, Oxford Economics will say that the boost to international tourism will result in a net gain for tax-payers.
Walpole, AIR and others have long argued that the additional VAT raised from increased spending by international visitors on hotels, restaurants, travel, culture and leisure, combined with more indirect tax revenues, would more than offset any VAT refunded.
So who is right? The difference between the two estimates is so big, and the negative impact of being the only European country not to offer tax-free shopping to international visitors is so great, that we can’t just ignore the issue. That’s why the only sensible thing is for the Chancellor to order an independent assessment of the full economic impact from the Office for Budget Reasonability.
That’s what we are all calling for. It’s what last month’s report by the Commons DCMS Select Committee into “Promoting Britain Abroad” has called for, following evidence presented to their inquiry by Walpole and AIR. It’s what the Chairman of the Treasury Select Committee has called for.
If, as we expect, an OBR assessment finds that the Chancellor’s decision to abandon plans for tax-free shopping was based on incomplete and inaccurate information, and that, in fact, it doesn’t cost the Treasury, but actually boosts GDP by billions of pounds and it supports tens of thousands of jobs across the UK, then we have a good chance of him reversing decision.
Because, once next week’s Budget has laid out the Treasury’s plans for spending, tax and borrowing, the Government will need to find cost-free measures to produce economic growth - and quickly.
AIR, Walpole and other campaigners don’t expect an announcement in next week’s Autumn Budget, but we are laying firm foundations so that, as we go into the new year, we can make one more push to get tax-free shopping restored. And then we can work together to make Britain the world’s number one destination of choice for international shoppers.
If you would like more information about Walpole's campaign to reinstate tax-free shopping for international visitors, please email our team on [email protected]
Picture: Henry Poole & Co.