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 UK opposition, led by Conservative leader Kemi Badenoch, is proposing to end VAT refunds for overseas visitors in a bid to boost British high streets and attract more high-spending tourists. The tax, introduced in the UK in 2021, has been blamed for a decline in visitor spending, particularly from wealthy shoppers in the Arabian Gulf, compared to other major European shopping destinations like Paris and Milan.
Badenoch plans to pledge the tax-free shopping for eligible visitors from outside the European Union, with the policy potentially extended to the end of the next parliament if it proves beneficial. She emphasized Britain's potential to become the world's shopping destination with its iconic retailers, inventive designers, and brilliant manufacturers.
VisitBritain estimates that the number of overseas visitors in 2024 remained 1.3% below pre-pandemic levels in 2019, with real visitor expenditure dropping by 8.7% and average spending per visit falling from £848 to £786.
The Centre for Economics and Business Research (CEBR) estimates that restoring tax-free shopping could generate £4.1 billion in additional spending, attract 2.35 million extra visitors annually, and boost gross VAT by up to £11.5 billion, potentially supporting over 150,000 jobs. The CEBR also suggests that each £1 of VAT refunded could generate an additional £1.56 in tax revenue.
The Conservatives argue that the estimated annual cost of £540 million could be offset by measures to crack down on so-called NHS tourism and more consistent charging of overseas patients not entitled to free treatment. Major retailers and tourism businesses, including Sir Rocco Forte, chairman of Rocco Forte Hotels, and Ros Morgan, CEO of the Heart of London Business Alliance, have backed the proposal, stating that Britain is the only major European shopping destination denying tax refunds to international visitors.
The Conservatives contrast their proposal with Labour's recently announced tourist tax powers for mayoral authorities, arguing that additional costs make Britain less attractive to international visitors.
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