Why tax-free shopping matters

One initially overlooked aspect of Liz Truss and Kwasi Kwarteng’s ill-fated mini-Budget was the plan to restore VAT-free shopping for tourists. The scheme, which allowed non-EU visitors to claim back 20 per cent on their purchases, was scrapped in 2020 by then chancellor Rishi Sunak but looked set for a comeback. This was excellent news where I live – Japan – and throughout Asia, where holidays are short and shopping plays a big part in overseas trips. But just as tourists were writing up their lists and planning their itineraries, Jeremy Hunt pulled the rug from under their feet by cancelling the uncancelling before it had even reached Kwarteng’s promised consultation phase.

Was he right to do so? Almost certainly not. When the scheme was first ended it was claimed by the Treasury that this would save £1 billion a year, and the claim this time is £2 billion. But these figures seem to be based solely on the reclamation of the lost tax revenue from tourists whom, it was assumed, would still visit.