By John-Paul Ford Rojas and Harriet Line and Emily Hawkins
22:01 24 Apr 2023, updated 23:56 24 Apr 2023
Business leaders yesterday took Rishi Sunak to task over the hated tourist tax, accusing him of scoring a ‘spectacular own goal’ for introducing the levy.
Burberry chairman Gerry Murphy confronted the Prime Minister at a business summit and attacked the ‘perverse’ decision to remove VAT refunds on foreign visitors’ shopping.
Mr Sunak left the door open to a U-turn on the tax, saying he was ready to look at data showing ‘what’s happening on the ground’.
But Chancellor Jeremy Hunt, despite admitting UK business taxes were too high, claimed it would be too ‘expensive’ to change the policy now.
It came as a growing list of bosses piled pressure on the Government to act, adding to the coalition of business chiefs already backing the Mail’s Scrap The Tourist Tax campaign.
Former prime minister Liz Truss, London Mayor Sadiq Khan and Liberal Democrat leader Sir Ed Davey also added their voices to the clamour, although the Labour Party refused to do so.
Mr Sunak left the door open to a U-turn on the tax, saying he was ready to look at data showing ¿what¿s happening on the ground¿ Chancellor Jeremy Hunt, despite admitting UK business taxes were too high, claimed it would be too ¿expensive¿ to change the policy now Sadiq KhanSir Ed Davey
READ MORE: Jeremy Hunt signals new tax breaks for firms in bid to see off Tory rebellion
Sir Martin Sorrell, the advertising industry mogul behind marketing firm S4 Capital, said: ‘There should be a change.’
Industry leaders say the decision to scrap VAT-free shopping for foreign visitors in 2021 means that London is now losing out on the post-Covid recovery in high-end retail and tourism being enjoyed by rival cities Paris and Milan. They say reinstating it would be a win for both business and the taxpayer, with research suggesting it could bring a multi-billion-pound boost to the economy.
Mr Murphy took the PM to task during a question-and-answer session at a Business Connect event in London yesterday, where Mr Sunak met 200 business leaders in a bid to woo corporate Britain.
The Burberry boss said: ‘It is somewhat perverse that, on the day we left the single market a decision made by you as Chancellor made the UK the least attractive shopping destination in Europe.’
Mr Murphy added that ‘virtually every other shopping destination’ in Europe offered tax-free shopping. He said the UK had seen ‘by far the weakest recovery of all the major markets’ for Burberry, a £10 billion FTSE company which is Britain’s biggest luxury brand. ‘We are actively exporting business as a result of that policy to our continental competitors,’ Mr Murphy said. ‘So I would ask you in the spirit of making Britain a more competitive environment, in the spirit of fostering growth… to reconsider that position.’
The PM was taken to task during a question-and-answer session at a Business Connect event in London yesterday, where Mr Sunak met 200 business leaders in a bid to woo corporate Britain Mr Sunak replied that he was ¿here to listen¿ while insisting there were ¿good reasons¿ for the policy The Chancellor seemed to take a harder line, sticking to Treasury claims that scrapping the tax ¿ which Ms Truss and Kwasi Kwarteng tried to do in their mini-Budget before the decision was reversed by Mr Hunt ¿ would cost £2 billion a year
READ MORE: SIR ROCCO FORTE: The short sighted ‘Tourist Tax’ is driving away business from our shores. If the Chancellor wants to restore the country’s fortunes, he must act now
The Government is proving deaf to our pleas and blind to logic, writes Sir Rocco Forte (pictured)
He added: ‘We would urge you to look at this. This is a spectacular own goal and it can be a reversed by a decision from you and the Chancellor.’
Mr Sunak replied that he was ‘here to listen’ while insisting there were ‘good reasons’ for the policy. But he added: ‘We’re always happy looking at what’s happening on the ground and see if things are panning out as we expected them to.’
The Chancellor seemed to take a harder line, sticking to Treasury claims that scrapping the tax – which Ms Truss and Kwasi Kwarteng tried to do in their mini-Budget before the decision was reversed by Mr Hunt – would cost £2 billion a year.
That is despite research by Oxford Economics suggesting that the figure is an overestimate and outweighed by the tax windfall generated across the wider economy by attracting more tourists. The Chancellor said: ‘That saved us about £2 billion at the time of the Autumn Statement when I had to put up taxes by £25 billion and I would not have wanted to have put them up by £27 billion in order to have avoided that measure.
‘I will look at all independent evidence about the impact. Of course, all things being equal, I want to attract tourists to the UK and I want them to spend their money in the UK rather than the other places so I completely understand the competitive issues that are raised.’
Scores of retail, hospitality and tourism bosses have already written an open letter to the Chancellor calling on him to scrap the tourist tax.
Hotelier Sir Rocco Forte, British Airways and Fortnum & Mason are among those calling for a change.
Industry leaders say the decision to scrap VAT-free shopping for foreign visitors in 2021 means that London is now losing out on the post-Covid recovery in high-end retail and tourism being enjoyed by rival cities Paris and Milan
Another 20 business leaders added their names to the letter last night, taking the total to 90. New signatories include the chief executives of the White Company and the Dorchester Collection, and the bosses of art gallery Hauser & Wirth, where Princess Eugenie is a director.
Crossbench peer Baroness Wheatcroft, chairman of the Association of Leading Visitor Attractions, branded the decision to remove tax-free shopping for tourists ‘utterly crazy’. She said: ‘It was the only sensible thing in the Truss mini-Budget, and then Jeremy Hunt did away with it.’
A plea to the chancellor from 90 leading business chiefs
The pandemic placed most businesses under acute pressure, particularly those in the hospitality, retail, travel and tourism sectors which we represent. So, the Treasury’s decision in 2021 to end the longstanding scheme that allowed international tourists to shop tax-free was puzzling and ill-timed.
Liz Truss’s shortlived government announced plans to reintroduce the VAT rebate to boost the high street, but this has now been reversed.
Every country remaining in the EU now offers tax-free shopping, while we don’t. Effectively, we have suddenly started charging 20 per cent more than other countries do for the same goods. The Treasury claims this move is saving the taxpayer £2billion a year, but this is flawed and misleading. The foreign visitors who have traditionally come from the US, Middle East, China and elsewhere to shop for the best of British inject large sums into the broader economy, on top of what they spend on retail purchases.
Figures from Visit Britain show that shopping has traditionally been one of the most popular reasons cited for visiting the UK. Indeed, British business traditionally made £3.5billion in tax-free sales to tourists every year. The scheme benefited tourist hotspots like London, Manchester, and Edinburgh, as well as out of town shopping villages.
Visitors did not just spend in retail stores – their custom supported hotels, restaurants, and theatres. Oxford Economics has concluded that if all the economic impacts of a tax-free shopping scheme are taken into consideration, the UK would, in fact, benefit to the tune of hundreds of millions of pounds a year.
The impact of its removal is already being seen. It was depressing to witness a great British brand like Mulberry closing the doors of one of its flagship stores as a direct result of the loss of tax-free shopping, as it did earlier this year.
New research from tax-free shopping experts Global Blue shows the UK is losing out on the significant spending made by international travellers as global travel resumes. Paris, Madrid and Milan can’t believe their luck as the UK’s lack of tax-free shopping drives travellers to spend in Europe.
Data covering international visitors from the USA, Gulf Cooperation Council (GCC) and south-east Asia regions from a sample of 11 leading retailers shows that whilst the UK has recovered post-pandemic to 64 per cent of
2019 levels of consumer spending, Italy is at 79 per cent, Spain at 84 per cent and France, which is benefiting most from the UK Government’s decision to remove tax-free shopping, has recovered to 108 per cent.
Looking at individual nationalities, the differences become even more pronounced. For USA visitors, the UK is back to 101 per cent of 2019 spend. However, Italy is enjoying spending from US visitors at 190 per cent of 2019 levels. Spain is up to 201 per cent and France is at a staggering 226 per cent.
For GCC visitors, the UK is at only 65 per cent of 2019 levels whilst Spain is already at 158 per cent, Italy at 166 per cent, and France topping out at 198 per cent.
In addition, UK residents are starting to take advantage of tax-free shopping in Europe, with £450million disappearing from high streets.
It is clear that the removal of tax-free shopping is turning into an extraordinary own goal for the UK.
We understand that there are pressures on the public finances at the present time. But the evidence shows that reinstating tax-free shopping would be a win for both business and the taxpayer.
We call on you to think again.
Sir Rocco Forte, Chairman, Rocco Forte HotelsSean Doyle, CEO and Chairman, British AirwaysThierry Andretta, CEO, MulberryNeil Clifford, CEO, Kurt GeigerCaroline Rush, CEO, British Fashion CouncilAlex Beard, CEO, Royal Opera HouseAnya Hindmarch, Founder & CEO, Anya HindmarchFraser Brown, Retail Director, Heathrow Airport Sir Paul Smith, Designer, Paul SmithTom Athron, CEO, Fortnum & MasonJonathan Akeroyd, CEO, BurberryHelen Brocklebank, CEO, WalpoleHannah Colman, CEO, Jimmy ChooChristopher Cowdray, CEO, Dorchester CollectionDee Corsi, CEO, New West End CompanyPaul Barnes, CEO, Association of International RetailGianfilippo Testa, CEO, Alexander McQueenPaul Jackson, General Manager, Claridge’sManju Malhotra, CEO, Harvey NicholsJohn Durnin, Business Director, Bicester VillageKnut Wylde, General Manager, The BerkeleyEric Heerema, Chairman and CEO, NyetimberKiki McDonough, Founder and Creative Director, Kiki McDonoughSandeep Bhalla, General Manager, The ConnaughtTheo Fennell, Founder, Theo FennellAndrew Stembridge, Executive Director, Iconic Luxury HotelsFranck X Arnold, Regional Vice President and Managing Director, The Savoy LondonChristian Bachler, Executive Vice President, WedgwoodGuillaume Marly, Managing Director, Hotel Café RoyalAndrew Henning, General Manager, Grosvenor House SuitesAntony Lindsay, CEO, FabergéThomas Kochs, Managing Director, Corinthia LondonMichael Wainwright, Managing Director, BoodlesPhilipp and Mark Mosimann, Mosimann’s Private Dining ClubMichael Bonsor, Managing Director, Rosewood LondonClaire German, CEO, Design Centre Chelsea HarbourJulia Carrick, CEO, Julia Carrick LuxuryHugh Seaborn, CVO and CEO, CadoganJoanne Rees, Managing Director, Elizabeth GageTrevor Pickett, CEO, PickettBrian Duffy, CEO, Watches of Switzerland Group Pamela Harper, Chairman and CEO,Halcyon Days and The Caverswall China CompanyGiles English, Co-Founder, Bremont Watch CompanyChris Roberts, Managing Director, Como HoldingsSophia Hirsh, Managing Director, Hirsh LondonNicholas Bond, Owner and Director, Franchetti BondGeorge Somlo, Director, Somlo Antiques LondonAdil Mehboob-Khan, CEO, Liberty LondonLuca Donnini, CEO, Temperley LondonDerrick Hardman, Managing Director, Global Blue (UK)David Edwards, Managing Director, Seiko UKRobert Ettinger, CEO, Ettinger LondonCharlie Pragnell, Managing Director, PragnellAnnoushka Ducas, Founder and Creative Director, Annoushka JewelleryErdem Moralioglu, Designer and Philippa Nixon, CEO, ErdemSean Gilbertson, CEO, GemfieldsAdrian Maronneau, Managing Director, Bucherer UKNicholas Brooke, CEO, Sunspel LimitedSimon Cundey, Managing Director, Henry PooleMartin Mason, Managing Director, Tricker’sSacha Rose, CEO, Derek Rose LtdCharlie Holland, CEO, Gusbourne Fine English WinesJulian Moore, Managing Director, DR HarrisHilary Freeman, Managing Director, Edward GreenJamie Gill, Executive Director, RoksandaChris Gaffney, CEO, Johnstons of ElginSteven Medway, Chief Executive, Knightsbridge Partnership and King’s Road PartnershipBaton Berisha, CEO, The Wolseley Hospitality GroupJonathan Reekie, Director, Somerset House TrustChrissie Rucker, Founder, and Mary Homer, CEO, The White CompanyPhilip Mould, Founder, Philip Mould and CompanyPrudence Gibson, Founder and Creative Director, E P O K Ewan Venters, CEO, Hauser and WirthJeremy Morris, CEO and Creative Director, David Morris JewelsEmma Willis, Owner, Emma WillisJoanne Taylor-Stagg, General Manager, The Athenaeum Hotel and ResidencesMark Evans, Managing Director, Bentley and SkinnerBen Dalrymple, Managing Director, Lock and Co. HattersEmmy Scarterfield, Designer, and Dickie Higgins, Managing Director, Emmy LondonHenry Deakin, Managing Director, Deakin and FrancisDean Girling, Director, Gaziano and GirlingSue Medway, Director, Chelsea Physic Garden Archie Hewlett, Founder, Duke and DexterFedro Gaudenzi, Founder and Director, Fedro GaudenziJonathan Church, Joint Managing Director, Cheaney Shoes LtdIrene Mateides, Founder and Publishing Director, FMSRobert Ogden, Executive Director, Richard Ogden LtdAndrew Guest, Commercial Director, Thomas Goode and Co. LtdEmma Fox, Chief Executive, Berry Bros. and RuddLalage Beaumont, Owner, Lalage Beaumont