Question to the HM Treasury:

To ask the Chancellor of the Exchequer, if he will make an assessment of the implications for his policies on VAT shopping at airports of the report by Oxford Economics entitled Assessing the impact of tax-free shopping in the UK, published in November 2022; and if he will take steps with Cabinet colleagues to re-establish the policy.

The Chancellor announced on 17 October 2022 that the Government will not be proceeding with plans to introduce a new VAT-free shopping scheme. This decision was included as part of the reversal of almost all of the tax measures set out in the Growth Plan on 23 September which were not legislated for in Parliament. The Chancellor has taken these decisions to ensure the UK’s economic stability and to provide confidence in the Government’s commitment to fiscal discipline. The Chancellor made clear in his statement that the UK’s public finances must be on a sustainable path into the medium term.

Introducing VAT-free shopping would come at a significant fiscal cost as it would subsidise a large amount of tourist spending which already occurs without a tax relief in place.

The independent Office for Budget Responsibility published their assessment of the withdrawal of the previous VAT-free shopping schemes in November 2020. This showed that the withdrawal of VAT-free shopping would raise a significant amount of revenue and have a limited behavioural effect on decisions to visit, or spend, in the UK.

Nonetheless, the Government keeps all taxes under review and considers all available evidence as part of the policy-making process.