UK Businesses Oppose UK’s Retail Export Scheme

The recommendations of the Office for Budget Responsibility (OBR) in the UK not to scrap the VAT Retail Export Scheme, which is widely known as the tourist tax has raised many an eyebrow among the business circles.

The government will consider OBR’s findings alongside industry representations and broader data, and welcomes any further submissions in response to the OBR’s findings,” a spokesman for the UK government said.

What has dismayed the businesses is that the case for reintroducing tax-free shopping in the UK was clear and overwhelming. While all EU member states were offering sales tax rebates to tourists, the whole tourist economy in the UK will be hard hit by not scrapping the scheme.

In an interview with City A.M., London Heathrow Airport Chief Executive Thomas Woldbyesaid that bringing back VAT-free shopping for international visitors by scrapping the so-called ‘tourist tax’ would be critical for the UK.

Retail businesses and a host of airports have since pleaded for the government to reinstate the tax break, with wealthy international shoppers choosing to splash their cash elsewhere, according to UK media reports.

Recent analysis from the Centre for Economics and Business Research in January revealed that nearly $13.8 billion had been wiped off UK GDP.

An HM Treasury spokesperson said: “The number of international visitors coming to the UK is almost back to pre-pandemic levels, and to support our high streets we have slashed their business rates bills by 75% and effectively cut their corporate tax by $68.38 billion if they invest.”

“The OBR is reviewing the wider economic effects of removing tax-free in-store shopping for tourists, and we will consider their findings within the context of the wider public finances once they have been published,” the spokesperson added.

Record Tourists at Heathrow Airport

Meanwhile, a record-breaking 18.5 million passengers travelled through Heathrow during Q1 of this year, more than ever before and the strong performance during what is traditionally a quieter period of the year was in part driven by growth on key business routes like Delhi and Mumbai, strong North American traffic, and surging East Asian demand growing 40% as against Q1 of 2023.

“The summer getaway is expected to be the busiest on record, and we have a robust operating plan in place to keep the airport running smoothly, even if unnecessary industrial action materialises. Reflecting the strong performance, our 2024 passenger outlook has been bumped up to 82.4 million,” Heathrow Airport said in a statement.

The statement also said that setting the ambition to be an extraordinary airport, fit for the future, while renewing the airport was commit to make every journey better.

The airport is focused on enabling a more efficient operation, that supports more passengers while delivering on its Heathrow 2.0 sustainability commitments. To support its new strategy and ensure the airport has streamlined roles and accountabilities across the Executive team.

Upgradation of Security

The airport’s $1.24 billion next-generation security programme continues apace as the management has installed 146 lanes across the airport, works have begun to replace the baggage system in Terminal 2 with a new state-of-the-art system, and work on resurfacing both runways without impacting the airport’s operating day will begin soon.

The airport management also said that the current government policy was curtailing the UK’s growth and competitiveness and the UK Ministers should rethink anti-growth policies like the “tourist tax” that discourage international visitors from spending in the UK; and unnecessary travel visas for transiting passengers that risk the UK’s global connectivity and Heathrow’s hub status.

Heathrow CFO Javier Echave said that Heathrow is on a strong financial footing with a clear flightpath ahead. On the horizon is Heathrow’s busiest summer yet with more passengers and destinations served than ever before. We’re ready to continue delivering, he added.