Harvey Nichols boss warns tourism tax is hurting UK economy
The boss of Harvey Nichols has warned that the so-called ‘tourism tax,’ created by the scrapping of tax-free shopping in 2021, is having a significant impact on the wider British economy.
Chief executive Manju Malhotra told The Times that the tax was affecting not just retailers that benefit from international visitors, but the “entire ecosystem of hospitality, hotels and cultural destinations, which are integral to the overall UK economy.”
She said that “for global businesses, this is feeding into decisions around investment into the UK relative to other markets,” adding that “tax-free shopping is a necessary fuel for the UK economy and is a significant lever in providing an attractive place for tourism and spending.”
It comes after a number of businesses have criticised the decision to scrap the previous scheme in 2021, which allowed international tourists to shop tax free.
Last month, a slew of business leaders – including Sir Rocco Forte – wrote to the Chancellor, describing the decision to abandon the scheme as an “extraordinary own goal.”
“International visitors have already adapted their travel patterns, including reducing the overall time spent in London, diverting spending into Europe and even de-selecting the UK as a destination,” Malhotra said.
“We have also seen that UK residents are travelling to Europe, particularly for big-ticket items in order to take advantage of the VAT rebate,” she added.
Liz Truss had previously attempted to reintroduce the VAT rebate during her time as prime minister, but the decision was scrapped by Jeremy Hunt late last year.
“VAT-free shopping does not directly benefit Brits – it allows foreign tourists who buy items in the UK to claim back VAT as they return home,” a Treasury spokesperson said.
“We continue to back high street retailers by slashing business rates bills by 75 per cent, helping with energy bills and effectively cutting corporation tax by £27 billion through full-expensing.”