In response to today's court ruling Paul Barnes, Chief Executive of the Association of International Retail, said:
“Today's ruling is no surprise. It is always difficult to challenge the Government’s decision-making process. But the case has forced the Government to reveal the evidence upon which it based its decision and this is shocking, both in what it contains and what is missing.
“For example, included in the Government’s evidence is a major consumer survey, commissioned by the Government which undermines one of its key claims. In public statements the Government has constantly said that tax-free shopping is not a major motivator for choosing to visit the UK and does not influence visitor spending behaviour. But its own research, revealed in court, shows exactly the opposite and that abolition of tax-free shopping will significantly reduce visitor numbers and spending, damaging the UK economy.
“And missing from the Government’s evidence is any assessment of the likely fall in the £3 billion VAT collected annually from the £15 billion of non-tax-free sales in hotels, restaurants, shops and cultural venues as international visitors spend less time and less money in Britain. A fall of just 10% would wipe out all the £310 million the Treasury forecasts it will gain from imposing this new tourism tax when spending returns to 2019 levels. Any fall over 10% will lead to a net loss of VAT.
“The Chancellor’s decision to make Britain the only European country not to offer tax-free shopping will result in up to 40,000 job losses across the UK and will hand over to France and Italy each year around £1.4 billion of tax-free sales that would have been made in Britain.
“These new revelations, and other issues raised in court, strengthen the call for an independent assessment of the full impact of this decision, as called for by the Chairman of the Treasury Select Committee.”
Extracts from the Government’s consumer research, conducted for HMRC and revealed in court
HMT public statements (in bold) vs HMRC survey findings (listed below):
- Tax free shopping is not a major motivator for choosing to visit the UK
- VAT RES does play a role in attracting overseas visitors to the UK, especially for China and India
- VAT RES is a strong influence in the decision-making process
- Most of those who used VAT RES already knew about it before travelling
- Experience of VAT RES appears to increase it’s influence on planning future visits to the UK
- Tax free shopping does not influence decision to visit the UK
- On a scale of 1 - 10, how much did the possibility of tax-free shopping influence your decision to come to the UK? 57% said 9 or 10
- Tax free shopping does not influence visitor spending behavior
- On a scale of 1 - 10, how much did the availability of tax-free shopping influence how much you spent in the UK? 46% said 9 or 10
- The average refund per person was just £270, not enough to influence visitor behaviour
- Mean VAT RES spend is £5,000 - so average refund is £1,000
- The refund fees are high and unfair to visitors
- 84% of users were aware of the fees in advance. 75% said they were reasonable.
- Visitors rated UK as the best tax-free shopping (80%); Japan was second at 17% suggesting that HMT has abolished a world beating product