Time to ditch your tourism tax, Mr Sunak: Heathrow accuses PM of ‘shutting the door’ to growth
Heathrow Airport has accused Rishi Sunak of having “closed the door” to domestic growth when he introduced a “tourism tax”.
The Prime Minister scrapped the tax-free shopping scheme for international visitors in 2020 while he was Chancellor, despite an outcry from several leading businesses.
He now faces pressure to announce a turnaround after companies said they were missing the opportunity.
Yesterday, Heathrow, Europe’s largest airport, warned that the UK’s reputation was at stake, and accused the Prime Minister of “keeping international shoppers away”.
It is one of hundreds of businesses urging Chancellor Jeremy Hunt and Sunak to scrap the tax in next month’s Spring Budget.
UNDER FIRE: Rishi Sunak scrapped the tax-free shopping scheme for international visitors in 2020 while he was chancellor, despite protests from businesses.
A Heathrow Airport spokesman said yesterday: “While exports are booming, Britain has closed the door to domestic growth, alienated international shoppers with a tourism tax and tarnished the UK’s reputation as a country with which to spend and do business.”
More than 400 business leaders have called on the government to back down, as part of a campaign by The Mail.
In a victory for The Mail, the government’s budget watchdog, the Office for Budget Responsibility, has opened an investigation into whether reintroducing tax-free shopping would cost more than it raises.
Heathrow Airport’s comments came as it said that 6 million traveled through the airport in January, an increase of 9.4 percent compared to the beginning of 2023.
But data shows that while tourists are returning to the country post-Covid, they are holding back on spending compared to other European countries.
Heathrow Airport warned that global retailers are turning away from the travel hub due to the tax and are instead setting up shop at airports in Paris, Amsterdam and Milan.
In May, the airport said it had to close 18 stores run by luxury designers, including Mulberry and Rolex, in “direct response” to the tax.
Daniel Platt, public affairs officer at Heathrow, added: “We still have stores closed, and we have space that retailers don’t want to take, which is the situation we found ourselves in in 2019.”
The UK’s competitiveness has eroded since 2021. High-spending visitors have turned to European rivals and spent there.
Chinese travelers in particular have voted with their wallets, not necessarily their feet, but they are spending less.
Heathrow’s stark words echo other warnings in the industry that the UK is losing competitive edge over rival destinations such as Paris and Lisbon.
Concerns: Terminal 5 at Heathrow Airport. The airport is calling on the government to scrap the so-called “tourism tax” in next month’s spring budget.
Employers say the impact of the tax is being felt beyond the luxury fashion sites of Bond Street and Bicester Village, with transport providers, restaurants and museums also affected.
Ministers tried to allay business leaders’ concerns by arguing that tax-free shopping only benefits luxury brands and wealthier tourists looking for a bargain.
But the new analysis cast doubt on the government’s previous calculations about the economic consequences.
The Center for Economics and Business Research noted last week that the tax is costing the wider economy more than £11 billion as wealthy tourists turn to cities such as Paris, where tourists can shop tax-free.
A number of business leaders have spoken out against the tax, including Neil Clifford, head of luxury shoe brand Kurt Geiger, who described it as a “schoolboy mistake”.
“These international visitors are spending a lot of time in other cities,” Clifford told The Mail last week.
Fashion designer Sir Paul Smith said the campaign to abolish the tax was not aimed at “helping rich shoppers buy cheap handbags”, but rather aimed at boosting the economy more broadly.
But the Treasury claims that restoring this benefit would cost the Treasury £2 billion a year.
(tags for translation) Daily Mail