Restoring tax-free shopping in Scotland for overseas visitors would generate £457 million a year in additional spending and create more than 9,000 jobs, according to new research.
Businesses gathering in Edinburgh today will hear the full cost of axing the VAT relief for tourists and how its reinstatement could boost the economy.
Figures from the Association of International Retail (AIR) show that an 11% projected rise in spending would not only boost retailers, but the entire tourist economy, including hotels, restaurants, tourist attractions, museums and galleries, taxis and transport. This would create 9,140 jobs.
Over 500 business leaders, including those representing leading Scottish brands such as Hamilton & Inches, the Scottish Whisky Association and Laings, are now calling for a rethink on the policy, arguing that as well as retailers the entire tourist economy has been affected.
Chancellor Rachel Reeves has been urged to concede a full-scale review of the last UK government’s decision to scrap tax-free shopping in 2021. The move has left the UK as the only economy in Europe no longer offering VAT rebates to international visitors.
Before Brexit, the VAT rebate was available to visitors from outside the EU and the decision to axe it was branded a ‘tourist tax’.
The UK is increasingly losing ground to France, Italy and Spain when it comes to visitor spending as a result, according to new data.
Figures from tax-free shopping specialist Global Blue and major retailers show that spending by non-EU visitors has stagnated at just 75% of pre-Covid levels in the UK, while soaring to 166% of 2019 levels in Spain, 159% in France and 137% in Italy.
Scotland has bucked the UK trend, with visitor numbers up 26% last year on 2019 levels and visitor spend up by a similar amount to £4 billion.
However, the AIR figures published today show that if Scotland had kept pace with the rest of the EU, there would have been an additional £365 million spent by EU visitors and £92 million by non-EU visitors.
Derrick Hardman, chair of the Association of International Retail, said: “Scotland is unfairly being held back by the UK Government’s policy on tax-free shopping.
“With Britain no longer in the EU, we have the opportunity to become the best place in the world for retail.
“Reinstating tax‑free shopping would give the UK a unique competitive advantage: the ability to attract not only non‑EU tourists, but also tap into a new market of 450 million EU consumers.
“It is time for the UK Government to work with industry to look again at the impact of tax‑free shopping on the economy and the Exchequer, and to design a modern, digital, fiscally positive scheme that supports jobs, investment, high streets and the visitor economy in Scotland and all across the UK.”
Chris Gaffney, CEO of luxury textile manufacturer Johnston’s of Elgin, one of the business leaders backing the campaign, said: ‘Tax-free shopping was 52% of sales in our Edinburgh store and 43% in St Andrews. Across all six of our stores, 33% of sales were tax-free.
“This change in policy has damaged our store sales in London, Edinburgh and St Andrews and inhibits our ability to grow UK manufacturing jobs.
“The UK risks losing its position as a global retail destination. Brands that trade internationally based on UK heritage and cultural cachet will find it more difficult to export without these touchpoints for global travellers that take their knowledge of UK brands back to their countries of origin.”
Roddy Smith, CEO of Essential Edinburgh, which represents over 500 businesses in the city, said: ‘Tax-free shopping is crucial for Edinburgh city centre.
“Ending tax-free shopping has put Edinburgh’s position as a shopping destination at risk, and will leave to fewer visits. Of those who do visit, fewer will buy goods in Edinburgh.”
Ahead of next year’s Scottish elections, the Scottish Tourism Alliance has called for politicians to provide more support for the sector.
Following its AGM in Glasgow yesterday, Marc Crothall, chief executive, said: “Too often, people assume tourism will simply ‘look after itself’.
“However, Scotland’s tourism industry is now at a crossroads.
“The choices made by our politicians in the next year will determine whether we invest in and grow one of our greatest economic and cultural assets, or whether we risk a gradual decline that would be catastrophic for businesses, jobs and communities across the country.”
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