Viewpoint: Bring back tax-free shopping

Many of our international guests are now adding on a trip to Paris, Berlin or Milan to do the shopping they would traditionally have done here. A valuable slice of their broader tourist spending is therefore lost too.

So it's completely short-sighted of the Treasury to look narrowly at the cost of the traditional VAT rebate when discussing this issue. Ministers protest that the £2b a year tax break has become unaffordable and benefitted only a few luxury stores in London's West End.

Both of these claims are wrong. I have organised an open letter to the chancellor calling for what we have dubbed the "tourist tax" to be scrapped. So far, 350 business leaders have signed, including many of the country's leading hotels – the Ritz, the Goring, Claridge's, the Dorchester Collection, the Bulgari, the Langham, Gleneagles and Bicester Hotel Golf & Spa. Liverpool's Ropewalks quarter and leading restaurants such as Galvin, Mosimann's Private Dining Rooms and the Boisdale group have also lent their names to the campaign.

Crucially, leading high-street brands have signed up too – including Primark, Marks & Spencer and Jigsaw. This demonstrates that this is an issue affecting every high street in the land. Many of these business leaders are traditionally very reluctant to become involved in political issues. So the fact they have been prepared to do so now should give the government pause for thought. The chorus of criticism of the tourist tax has become deafening and a responsible government should ignore it no longer.

As for the supposed cost of rebating VAT for tourists, the Treasury has privately asked for evidence that it has got its sums wrong. So together with Watches of Switzerland and the Daily Mail, which is campaigning on the issue, I recently commissioned a report by independent economic forecasters to examine all aspects of this issue.

The Centre for Economics and Business Research concluded that the tourist tax is costing the UK £10.7b in lost GDP and two million extra foreign visitors a year spending money across the economy.

If the traditional VAT-free shopping scheme for tourists was restored, there would be a clear overall benefit to the public finances. For every £1 refunded in sales tax to foreign tourists, the exchequer would gain £1.56 in other taxes thanks to the dynamic economic effects of tourist expenditure. The additional revenues generated would outweigh the losses associated with sales tax refunds by £2.3b in 2023, the report found. There would also be employment impacts. A fully utilised tax-free shopping scheme would have supported an estimated 172,000 jobs in 2022 and 201,000 in 2023. So we now have economic analysis showing very clearly that restoring tax-free shopping would boost the public finances and the wider economy. As we struggle to achieve any meaningful level of economic growth, the UK simply cannot afford to go on driving high-spending tourists into the arms of our rivals.

The Conservative Party used to claim to be on the side of business, and even Labour's mayor of London Sadiq Khan and the Liberal Democrat leader Ed Davey have accepted the logic of our arguments. The chancellor should use the autumn statement in a few weeks' time to indicate an immediate end to the tourist tax.

Sir Rocco Forte is chairman of Rocco Forte Hotels

If your business is affected by the ‘tourist tax' and you would like to add your name to Sir Rocco's open letter to the chancellor, please contact jamesc@j-hcommunications.com