Treasury officials have requested new data on the economic impact of the tourist tax, as hopes rise among businesses that Ministers could be about to
Treasury officials have requested new data on the economic impact of the tourist tax, as hopes rise among businesses that Ministers could be about to mount a U-turn on the unpopular measure.
More than 320 industry chiefs have called for a return of VAT-free shopping for international visitors, arguing that a vast economic eco-system is being stifled.
Businesses ranging from hotels, theatres and transport providers have been hit by the tax, which the Mail is campaigning to abolish.
Now officials working for Chancellor Jeremy Hunt have asked for evidence of the ‘wider economic impact’ of the move – for use in modelling by the Office for Budget Responsibility (OBR) – after business leaders complained that shoppers were being driven into the hands of rival European cities.
A source told The Mail on Sunday: ‘We knew there was likely to be a decline in sales as a result, but the impact on the broader economy had not been properly factored in.’
Officials working for Chancellor Jeremy Hunt have asked for evidence of the ‘wider economic impact’ of the move – for use in modelling by the Office for Budget Responsibility (OBR)
Last night, Paul Barnes, of the Association of International Retail, described Treasury work on the impact of the tax as ‘inaccurate and incomplete’, saying it ‘failed to anticipate the change in behaviour which has seen tourists choose other countries instead’. Cultural gems including Shakespeare’s Globe Theatre, The Old Vic and The Shaftesbury Theatre have said the policy is deterring tourists from visiting the UK, while hotel firms say they are missing out on bookings.
Fergus Stewart, chief executive of The Lancaster Landmark Hotel Company, said the UK worker was ‘the real loser’, while Paris, Rome and Dublin were reaping the benefits of ‘our Government’s stubbornness’. He added: ‘There is a misconceived perception that this is a tax that only helps the rich, but the benefits are more widespread. Welcoming high net worth individuals helps to boost hospitality and retail enormously, which in turn provides jobs, enables better pay and conditions and allows our colleagues to receive a greater amount through service charges and gratuities.’
The tourist tax is also a problem for small businesses, according to Lionel Benjamin, boss of AGO Hotels. He fears international tourists are simply deciding that ‘their money will go much further in countries where tourists get back the VAT rate. A 20 per cent saving is a significant saving.’
Royal Opera House boss Alex Beard said there was ‘a massive disincentive’ for tourists. He said: ‘As a result, London is doing far less well than our European competitors, with a direct impact on the potential overseas tourist market for all of our work.
‘In turn, this means that the inflationary pressures on our budgets will be borne disproportionately by UK audiences at a time of a major squeeze on household finances.’ Visiting the UK is ‘extremely expensive’ for tourists and a tax cut would encourage more visitors, according to Stuart Murphy, chief executive of English National Opera.
Critics dispute the Treasury’s claim that scrapping the tourist tax would cost £2 billion a year, saying there would be a net gain of about £350 million.
A Treasury source said: ‘Introducing a new scheme would come at a cost of up to £2 billion and would not benefit British people, as it allows only visitors to claim back VAT on purchases when they go home.’
A Treasury spokesman said: last night: ‘Evidence shows that the key motivators for tourists visiting the UK are our rich history and heritage and vibrant towns, not shopping.’