AIR CEO Paul Barnes gave evidence to the Cultural, Media and Sport Select Committee on the restoration of tax-free shopping and extension to EU residents at the "Promoting Britain Abroad follow-up" session on November 14th.

To watch the full session please click here.

To read the full AIR's evidence presented to the Committee please find it here.

1. International visitor economy as a high growth sector for the UK

 

In the 10 years to 2019, the growth in the sector was three times the overall UK level.

And it is likely to grow more because:

i) the high-spending Chinese market still has a lot more growth to come

ii) AI will bring massive growth in global wealth and free up a lot more leisure time, which must result in more international travel.

Britain is a top ten global visitor destination but we face increasing competition.

With shopping being a key attraction for international travellers, it is a shortsighted move to make Britain the only European country not to offer tax-free shopping.

2. The impact of ending Tax-free Shopping to non-EU visitors

 

Two years ago, the debate was about the Treasury's forecast and the industry's forecast which did not agree with each other.

The Treasury forecast assumed tax-free shopping played a minor role in the whole visiting experience and had little or no behavioural impact on international visitors, either on choosing to visit the UK or their spending level. 

Industry forecasts suggest tax-free shopping does have a significant impact

Now we have actual sales data from 2022 to show which forecast was more accurate.

Here are three key findings from the real-world data

⏺ In 2022, spending by non-EU international visitors in the EU rose by 98% above 2019 levels but fell by 28% in Britain.
⏺ British shops lost £1.5bn of spending as international visitors chose to shop in France, Italy and Spain instead.
⏺ The trend is worsening in 2023.

3. Tax-free shopping would generate a net positive of over £369 million in tax revenue, not cost £2 billion forecasted by the Treasury

 

Rt Hon Damian Green MP asked a key question at the DCMS Select Committee hearing into the impact of ending tax-free shopping.

Is the Treasury right when it says extending tax-free shopping would cost £2bn annually?

Here CEO Paul Barnes explains why we think the Treasury got it wrong, and why we believe the net impact is positive for tax revenues.

4. Opportunities and growth from the extension of tax-free shopping to EU residents

Damian Green MP's constituency is s good example of how Britain could gain by extending tax-free shopping to visitors from the EU.

His constituency, Ashford in Kent, contains both a Eurostar station and a McArthur Glen Shopping centre.

The UK would be creating a whole new market of day trips to the UK from mainland Europe to shop in Ashford. This would be a huge boost to local economy and would help to persuade Eurostar to reopen the Ashford station, which it closed during COVID.

We estimate this new and unique tourism market coukd be worth around £12 bn every year providing the the Treadury with an additional £1.2bn VAT annually.