Source · Select Committees · Culture, Media and Sport Committee
Recommendation 5
5
Accepted
The Government’s decision to withdraw from the VAT Retail Export Scheme has made Britain less...
Conclusion
The Government’s decision to withdraw from the VAT Retail Export Scheme has made Britain less appealing to tourists while increasing the appeal of our European competitors. It has been a spectacular own goal, signalling that the Government does not, despite its protestations to the contrary, recognise the significance of retail to the inbound tourism sector. For a short while, it appeared to have seen sense, committing once again to providing tax-free shopping for inbound visitors. To then reverse this decision, less than a month later with no new financial analysis provided, only serves to demonstrate the paucity of thought associated with these policy changes. By the Treasury’s own estimation, the scheme could at the very least have been cost neutral. We agree with the industry that a broader analysis of the indirect benefits of the scheme would demonstrate that its cost would be far outweighed by the revenue it would generate and the increased numbers of tourists coming to the UK. (Paragraph 37) 34 Promoting Britain abroad
Government Response Summary
The government defends its decision to withdraw from the VAT Retail Export Scheme, referencing the OBR assessment, but states it keeps all taxes under review and will endeavour to consider the impact of future decisions affecting the inbound tourism sector.
Government Response
Accepted
HM Government
Accepted
The independent Office for Budget Responsibility published their assessment of the withdrawal of the previous VAT-free shopping schemes in November 2020. This showed that the withdrawal of VAT-free shopping would raise a significant amount of revenue and have a limited behavioural effect on decisions to visit, or spend, in the UK. The Government consulted widely on this change and specifically asked for evidence on the impacts of withdrawing the schemes. This evidence was assessed alongside the fiscal and economic impacts and balanced against the policy objectives in this area. The withdrawal of the VAT Retail Export Scheme was also part of a wider package of changes, with significant benefits for UK consumers - the reintroduction of duty-free sales for EU bound passengers and the quadrupling of inbound allowances for alcohol. Nevertheless, the Government keeps all taxes under review and considers all available evidence as part of the tax policy making cycle. DCMS will endeavour to consider the impact of future decisions affecting the inbound tourism sector, noting both direct and indirect consequences of a policy. This will be helped by ensuring that DCMS remains well connected with industry to attain a thorough understanding of the sector’s progress. Particularly, the Tourism Industry Council working groups represent regular partnership between industry and government, and present an opportunity for DCMS to establish learnings from key intelligence and insights for future policy making.