United Kingdom

Fears over duty-free jobs disaster when Britain ends VAT refunds for foreign visitors to UK shops

MPs have demanded the Government reveal how hard the UK economy will be hit when duty free shopping for foreign tourists is scrapped next month.

Chancellor Rishi Sunak will end VAT refunds for international visitors to British shops from January 1, even as the high street is fighting for its survival after the Covid-19 crisis.

Dozens of businesses and MPs have warned that 40,000 high street jobs will be lost as wealthy tourists divert their spending to rival European countries such as France and Italy.

The row comes as high street chains fight to recover after a torrid year that will see 20,000 shops close and 235,000 retail jobs lost.

Earlier this week Topshop owner Arcadia and Debenhams went bust putting 25,000 jobs at risk.

Chancellor Rishi Sunak will end VAT refunds for international visitors to British shops from January 1 as part of Brexit, which could see 40,000 jobs lost warn businesses and MPs. Pictured: The world duty free shop in London Heathrow Airport

The Treasury this week published an assessment of the impact of removing the tax break, but did not report on the hit to hotels, restaurants, theatres and other cultural sites.

They benefit from visits from wealthy tourists and contribute billions in tax revenue to the Exchequer.

Tory MP Mel Stride, chairman of the Treasury Committee, said: 'No estimate of the effects on the wider tourism and leisure sectors has been provided.

'These sectors will be worried that up to 30,000 tourists, many of whom are high spending, could be dissuaded from visiting the UK.

'The Government should now commission an independent evaluation of the effects of the measure and publish it.'

The Treasury estimates that up to 30,000 fewer tourists will visit the UK because of the change, although campaigners fear it will be much higher.

It said the move will save £400million by 2024, adding that keeping the scheme in place would cost the taxpayer an extra £900million as Brexit would force the UK to extend the offer to EU nationals, who are currently excluded.

Last month the figures were damned by a separate group of 24 MPs and peers, including former ministers Tracey Crouch and Baroness Altmann, who said the change 'will leave Britain a poorer and less attractive global destination just as we start our new future on the world stage'.

In a letter to the Chancellor, they said the decision has been made on the basis of bogus calculations, and that the Government had 'misunderstood' how price-sensitive high spending international tourists are.

They claimed ministers have overestimated the cost of extending the schemes to EU visitors by 'at least 300 per cent', and underestimated the number of current users of the scheme by 'at least 400 per cent'.

Last month 11 leading luxury firms wrote to the Chancellor, warning the move could cost Britain its place as a world-leading tourism and shopping destination.

They said the 'deeply troubling' tax hike would make the UK 'the least competitive duty-free regime in Europe'.

Dozens of household high street names, including Boots, Dixons and Marks & Spencer, have already lashed out at the tax increase describing its as a 'hammer blow'.

Heathrow Airport said the decision to end duty-free shopping could cost tens of thousands of jobs in the aviation industry. Luxury products account for as much as three-quarters of total sales in airports.

The Centre for Business Research has estimated the cost of removing tax-free shopping could be as high as £3.5billion, and will lead to 138,000 job losses.

The Chancellor's critics also claim Britain's decision to pull back tax refunds has caused jubilation in rival capitals.

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