As the Tourist Tax continues to cost the UK billions, doing nothing would be criminal

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By Marco Passoni

It is amazing to me that the Tourist Tax which the UK government foolishly instated in the wake of Brexit is still something we have to speak about. Surely this should have been a PR stunt which was recognised as a huge error and was undone quickly and quietly at the first given opportunity.

Apparently not. We are now more than 18 months into the UK being a much less attractive destination for travelling shoppers than all of its neighbours and still the government is doing nothing. I was among the many who warned of the impact this would have when it was announced in January 2022 that the UK would scrap tax-free shopping in most categories for all departing travellers. I joined in congratulating Liz Truss’ government on one of their few good decisions when they announced the policy would be reversed – and I joined everyone else in shock and disbelief when that plan was itself reversed.

We are now more than 18 months into the UK being a much less attractive destination for travelling shoppers than all of its neighbours and still the government is doing nothing

We said it would make the UK less competitive as s retail ecosystem, it would dissuade travellers and cost the country money. Surely the government would not be blind and foolish enough to cling onto a policy which is so obviously going to fail. But they have – and it has.

The Tourist Tax has been in the news again over the past week or so, as the deep and very real impact it has had on our tourism and retail sectors has become clear. A report from the CEBR (Centre for Economics and Business Research) shows that the Tourist Tax is costing the UK £10.7 billion. Indeed, the research claims that additional revenue from bringing the scheme back would outweigh any possible losses by £2.3 billion. Is this a time when the UK government can afford to leave that sort of money on the table?

Now 350 businesses have written an open letter to the Chancellor of the UK Jeremy Hunt, and the signees show that this is not just a retail issue anymore. Alongside luxury brands such as Burberry and Ferragamo, retailers ranging from Harvey Nichols, Selfridges and Marks & Spencer, and travel stakeholders including British Airways and Heathrow, cultural hubs and businesses which rely on tourism have also joined the fight. Theatres such as the Royal Opera House and hotel groups from Dorchester Collection to Rocco Forte Hotels are all involved.

The letter puts the problem very simply:

Every country remaining in the European Union now offers tax-free shopping, while we don’t. Effectively, we have suddenly started charging 20% more than other countries do for the same goods. The treasury claims this move is saving the taxpayer £2 billion a year, but this is flawed and misleading.

Can all of these businesses be wrong? Of course not.

Figures from Global Blue show that the UK is now a less attractive destination for travelling shoppers, especially those from key locations such as the USA, Middle East and South East Asia. According to the latest data, stores in the UK have seen shoppers from these demographics recover to 64% of pre-pandemic levels. Comparatively, Italy is at 79%, Spain at 84% and France is at an incredible 104%.

Prime Minister Rishi Sunak’s spokesperson has said: “We are always happy to listen to the sector about their concerns and obviously we will respond accordingly.”

Either they are not listening or we are not speaking loudly enough.

We are now losing our sparkle as a tourist destination

As the boss of Fabergé, Anthony Lindsay, put it: “The UK has always been a global destination for retail. We are the home of some of the world’s finest stores, but we are now losing our sparkle as a tourist destination.”

It is in all of our interests to ensure that the UK gets its sparkle back – and quickly. Once shoppers set their minds against the UK as a destination, it will be hard to win them back over. Each and every one of us must speak up now such that, for those in power. ignoring the obvious is no longer an option.

Marco Passoni has decades of experience in the travel retail sector. He has spent the majority of his career in senior leader positions throughout the market, including a 12-year tenure as CEO of a leading international Duty Free distribution company and a further 8 years running a retail firm that operated fashion mono-brand stores in several international airports.
Today, as Senior Executive VP and founding partner of 2.0 & Partners, he leads the company’s efforts in developing and innovating services which create new opportunities and partnerships for all members of the travel retail Trinity. A former elite-level sailor, with a World Championship to his name, Marco now spends much of his time airside, experiencing the changing travel retail industry first-hand, to better guide partners and clients on the best way to do business in this vibrant and unique market.