Rishi Sunak and Jeremy Hunt face Tory rebellion over VAT-free shopping as critics say tourist spending has slumped since the benefit was axed after Brexit
- Chancellor Jeremy Hunt said axing VAT-free shopping saves £2billion a year
- Lack of wealthy tourists means Mulberry may close flagship Bond Street store
- Tory MP Sir Geoffrey Clifton-Brown warned: ‘it is affecting jobs and businesses’
Calls to bring back VAT-free shopping for international tourists intensified yesterday amid fears that the UK is losing out to European rivals.
Sir Geoffrey Clifton-Brown, deputy chairman of the Commons public accounts committee, argued that the problem was harming the economy.
His warning came hard on the heels of luxury handbag firm Mulberry saying it may be forced to shut its flagship Bond Street store as wealthy overseas visitors stay away.
VAT-free shopping allows tourists to claim back 20 per cent on their purchases. It was first axed by then-chancellor Rishi Sunak when the UK left the EU.
VAT-free shopping was first axed by then-chancellor Rishi Sunak when the UK left the EU
Kwasi Kwarteng tried to reintroduce it in his ‘mini-Budget’, but new chancellor Jeremy Hunt reversed the plan claiming it would save the Treasury £2billion a year.
Every country in Europe charges a minimum 15 per cent rate of VAT but offers a refund for overseas visitors taking purchases home.
Critics said Mr Hunt’s U-turn on the plans would be a ‘hammer blow’ to tourism and high streets, slowing the return of international visitors and costing the Government more in lost tax income elsewhere.
Tory MP Sir Geoffrey said: ‘It is affecting jobs and businesses. And think of the extra trade we would be doing in the run up to Christmas if we had this in place.’
Luxury handbag firm Mulberry said it may be forced to shut its flagship Bond Street store as wealthy overseas visitors stay away
He added: ‘I have been trying to persuade the Treasury that it will not be a cost of £2billion. I think it’s cost neutral, and probably will even be beneficial for the country.’
Mulberry boss Thierry Andretta said UK shoppers were travelling to Europe to pick up luxury goods as he called on the Government to act.
Former business secretary Jacob Rees-Mogg said: ‘[It] brings in extra business that would otherwise not come to Britain. It helps to grow the economy and this increases the tax take organically.’
Tory MP Nickie Aiken said the UK was losing visitors to Paris and Milan and called on the Government to reinstate the tax break ‘as soon as possible’.