UK opposition seeks to axe VAT on shopping for overseas visitors
A future Conservative government will restore VAT refunds for overseas visitors in an attempt to lure high-spending tourists back to Britain’s struggling high streets. London has been hit by a drop in spending, particularly among wealthy shoppers from the Arabian Gulf since the tax was imposed in the UK in 2021, unlike other major European cities popular with shoppers and tourists, such as Paris…
The opposition party in the United Kingdom is proposing to eliminate Value Added Tax (VAT) on shopping for tourists visiting from outside the European Union. This move aims to attract high-spending visitors back to Britain's struggling shopping districts, particularly after a decline in spending from wealthy shoppers, mainly from the Arabian Gulf, since the VAT was introduced in 2021.
The proposal, backed by Conservative leader Kemi Badenoch, will be implemented if it proves to provide a net benefit by the end of the next parliament.
London has experienced a decline in tourist spending, with real visitor expenditure falling by 8.7% in 2024 compared to pre-pandemic levels in 2019. The number of overseas visitors remained 1.3% below pre-pandemic levels, with the average spending per visit decreasing from £848 to £786. The Centre for Economics and Business Research (CEBR) estimates that reinstating tax-free shopping could generate £4.1 billion in additional spending and bring in 2.35 million extra visitors annually. The scheme could also increase gross VAT by up to £11.5 billion, supporting over 150,000 jobs.
CEBR also suggests that every £1 of VAT refunded could generate an additional £1.56 in other tax revenue. The Conservatives argue that the estimated annual cost of £540 million could be offset by tackling "NHS tourism" and ensuring fair charges for non-entitled overseas patients. Major retailers and tourism businesses have also expressed support for the proposal, stating that Britain is the only major European shopping destination that denies international visitors tax refunds.
The Conservatives contrast their plan with Labour's recent announcement of tourist tax powers for mayoral authorities, arguing that the additional costs make Britain less attractive to international visitors.
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