UK Retailers Push for Tourist Tax-Free Shopping to Boost £3.65 Billion in EU Spending

UK retailers are urging Chancellor of the Exchequer Rachel Reeves to reinstate tax-free shopping for tourists, aiming to bolster the 'visitor' economy. The Association of International Retail estimates that reinstating VAT-free shopping could lead to an additional £3.65 billion in spending by EU tourists. This would supplement the £1.5 billion in non-EU visitor spending lost when the UK ended tax-free shopping in 2021 following Brexit.

Retailers argue that the absence of tax-free shopping has resulted in a loss of business to countries like France and Spain, which still offer this benefit to non-EU tourists. They criticize the Treasury for not considering the broader economic stimulus that a tax-free policy could generate. Major retailers, including Mulberry Group Plc, Fortnum & Mason Plc, and John Lewis, have signed an open letter to Chancellor Rachel Reeves, advocating for the reinstatement of tourist tax-free shopping.

However, Reeves faces a fiscal deficit heading into this year’s autumn budget, which reduces the likelihood of reconsidering her position on tax-free shopping. Having increased payroll taxes earlier this year, she is now under pressure to offer relief measures for businesses. The Association of International Retail notes that reinstating VAT refunds would make the UK the only European nation offering such rebates to the EU’s 450 million citizens.

In addition to the tax-free shopping debate, Reeves is considering changes to import tax rules following concerns from UK retailers about cheap goods from China flooding online marketplaces. She has stated that the government is reviewing rules allowing goods worth £135 or less to bypass customs duties, a move supported by retailers like Sainsbury’s and Next. Retail entrepreneurs like Theo Paphitis have also shown support for the Chancellor’s remarks, arguing that the rule review is necessary to shield the country’s economy.

Beyond the UK, other countries are taking steps to curb a flood of low-cost imports from Chinese retailers. In the US, new legislation has been introduced to scrap the “de minimis” rule, which currently allows shipments under $800 to bypass import taxes and regular customs checks. Similarly, the EU announced plans to phase out its own exemption on customs duties for low-value parcels.