Heathrow Airport urges UK government to reconsider VAT-free shopping

Heathrow Airport, a critical gateway for global travel, has issued a warning against the adverse impacts of the UK’s recent abolition of VAT-free shopping, thisismoney.co.uk has reported.

Describing the move as a ‘tourist tax’, Heathrow highlights the detrimental effects on inbound tourism and the broader economic landscape. Teaming up with influential bodies including the British Chambers of Commerce and the Federation of Small Businesses, Heathrow is leading a campaign to reinstate an internationally competitive tax-free shopping incentive.

‘While exports are thriving, Britain has shut the door on home-grown growth, turning away international shoppers through the tourist tax and tarnishing the UK’s reputation as a competitive country to spend and do business with,’ Heathrow said.

The decision to eliminate VAT-free shopping, enacted three years ago under former Chancellor Rishi Sunak, has drawn widespread criticism from retailers, companies, and brands across the UK.

Heathrow urges reinstating this vital incentive, noting its pivotal role in driving economic growth and supporting job creation. Despite concerns raised by HM Treasury regarding the associated costs, independent studies indicate the potential for a significant boost to the economy, projecting an injection of over £10 billion annually and the creation of approximately 78,000 jobs.

The Office for Budget Responsibility is to conduct a comprehensive cost-benefit analysis of the ‘tourist tax’, providing some optimism for a reversal.

Heathrow Airport has further commented that recent passenger statistics indicate a gradual recovery in travel volumes following the pandemic. Despite the progress, regulatory constraints pose challenges to the airport’s earnings potential, necessitating a balanced approach to recovery efforts, the report noted.

High VAT hitting UK tourism, say industry insiders

A group of UK travel industry insiders is claiming that the high Value Added Tax (VAT) rate in the country is detrimental to the industry, making it difficult to compete with European neighbours.

Led by the British Hospitality Association (BHA), a large number of organisations that are dependent on UK tourism, including hotels, attractions and associations, have joined forces to campaign for a sizeable reduction in VAT. Britain’s 20 percent VAT rate compares unfavourably with many other European countries, including France, Ireland and Italy, none of which charge more than 50 percent of Britain’s rate. The group argues that the additional levy on virtually everything that foreign visitors buy during a visit to the UK can act as a major disincentive to visiting the nation. Also, UK residents can be deterred from visiting their domestic attractions by costs that are inflated due to the tax.

Most other European Union countries take advantage of a ruling that allows reduced VAT on tourism related purchases, and the action group, CutTourismVAT, would like to see the UK do likewise. At the moment, of the 27 member countries, the UK is one of only four that has not taken then opportunity to relax the levy on accommodation for visitors. Almost half of member countries do not impose the full tax level on entry to amusement parks, and 18 member states do not impose the full tax on entry to cultural attractions. Nearly half of member countries reduce their tax rate for meals in prepared food outlets.

CutTourismVAT would like to see VAT on tourism-associated purchases in the UK reduced from 20 percent to 5 percent; an action that it claims would result in £4 billion of additional revenue and 80,000 new jobs in the industry.