The UK government’s decision to maintain the VAT on tourist shopping has sparked criticism from business leaders in London’s West End, with concerns over competitiveness and lost revenue.
West End business leaders have expressed their discontent with the UK government’s decision not to eliminate the “tourist tax” as part of the latest Budget announcements. This decision maintains the VAT on shopping for tourists, which is estimated by the Office for Budget Responsibility to potentially result in nearly £1.5 billion in lost revenues over the current and next years. Influential figures in the industry, including hotelier Rocco Forte, have argued that this makes the UK less competitive compared to other European cities, potentially damaging the tourism and retail sectors.
Despite the backlash, Chancellor Jeremy Hunt announced other fiscal measures, including a 2p reduction in national insurance for employees and the self-employed, described as a measure to bring personal taxes to their lowest level since 1975. Nevertheless, the overall tax burden in the UK is anticipated to increase to a near post-war high, with the Office for Budget Responsibility suggesting that the changes could lead many into higher tax bands, thereby generating an additional £41.1 billion in revenue.
The Budget also outlines support for parents earning over £50,000, a reduction in capital gains tax on property sales, and the removal of non-dom status for wealthy foreigners, among other measures aimed at stimulating economic growth and addressing employment rates. While the Chancellor emphasized the positive impacts of these decisions, opposition voices, including Sir Keir Starmer, have criticized them as insufficient in the context of rising living costs and tax burdens.
The failure to reintroduce tax-free shopping for tourists, coupled with the broader tax and financial strategies outlined in the Budget, has sparked a range of reactions from various sectors, underlining the complex balance the government seeks to strike between fostering economic growth and managing the public finances amidst concerns over competitiveness and living standards in the UK.
