REVIVING TAXFREE SHOPPING: ACCESS TO PROSPERITY AND TOURISM

BY THE PARLIAMENTARY SOCIETY PRESS OFFICE

In the area of evaluating VAT refund systems for international tourists, the Centre for Economics and Business Research (Cebr) has cultivated an esteemed proficiency. A multitude of reports spanning diverse jurisdictions bear witness to Cebr's authoritative voice in discerning the intricacies of costs and advantages intrinsic to these schemes. Moreover, our erudition was summoned to illuminate the court of appeal in opposition to the UK's decision to forsake the tax-free shopping initiative in 2021. Despite our meticulous analysis that illuminated the clear economic merits underpinning a VAT refund system, along with the exposé of analytical fallacies in the government's calculations, the cessation of the scheme endured. Adjudicators opined that, irrespective of the original decision's rectitude, the courts bore no mandate to overturn a political decree of such nature.

Fast-forward two years, we have revisited these figures to gauge the extent of economic atrophy and job deprivation afflicting the UK economy, emanating from the absence of an incentive for international visitors –an amenity they luxuriate in across a myriad of global locales, particularly within the European Union's precincts. Once the UK was enshrouded by EU regulations, tax-free shopping was confined solely to non-EU patrons. The present potential for reaping economic benefits far eclipses prior prospects, as the enticing prospect of an effective tax reprieve beckons all international visitors, transcending the bounds of nationality.

This seminal report was formally unveiled at the commencement of the week, as a pivotal facet of the 'Scrap the Tourist Tax campaign'. The coalition, boasting endorsement from the vanguards of 350 preeminent retailers and brands in the UK, manifests a resounding call for reinstating the waning allure of tax-free shopping.

The crux of our findings are encapsulated thus:

The Centre for Economics and Business Research propounds that the revival of the scheme would unleash additional revenues, eclipsing the losses attributed to VAT reimbursements, by a substantial £2.3 billion in the year 2023.

The campaign garners immense patronage, as testified by 350 luminaries encompassing the spheres of British Airways, Marks & Spencer, Harvey Nichols, Primark, Burberry, Heathrow, Gatwick, Victoria Beckham, the Royal Opera House, British Fashion Council, Fenwick, Charlotte Tilbury, UKinbound, Tate, The Really Useful Group, Shakespeare's Globe, Southbank Centre, and Bicester Village. An open missive penned to the

Chancellor, orchestrated by the esteemed hotelier Sir Rocco Forte, lambasts this decision as an "astounding self-in nation's economic vitality. Regrettably, this verdict has af unwarranted epithet upon the UK, designating it the costliest emporium on the European expanse. While the EU territories continue to extend the allure of tax rebates to foreign shoppers, the UK's appeal wanes.

Inscrutable calculations by the Treasury pertaining to the ostensible cost of tax-free shopping conspicuously ignore the consequential outlays made by tourists in their lodging, gastronomical sojourns, theatre rendezvous, museum explorations, and even public transport. Furthermore, a burgeoning trend among UK shoppers entails cross-border expenditures, with VAT reimbursements effectively defraying their travel expenses.

Conclusively, the Cebr report posits that eligible expenditure amenable to tax-free shopping stood at an approximate £6.6 billion in 2022, poised to escalate to an estimated £7.7 billion in the ensuing year. Assuming an unremitting 100% rate of VAT refund adoption, £1.1 billion and £1.3 billion could have been channelled back to customers via VAT reimbursements for 2022 and 2023, respectively.

Per a visitor-centric calculus, these refunds could have wrought a 4.2% reduction in the UK visitation expenditure. Relying upon the principle of demand elasticity in relation to price, this diminution would have engendered an in 1.7 million visitors in 2022, crescendoing to a substantial 2.0 million in the subsequent year.

In corollary, if these incremental visitors were to mirror the expenditure patterns of their predecessors, an additional £1.4 billion and £1.7 billion would have coursed