Jeremy Hunt has ordered a review into the so-called “tourist tax” in the clearest sign yet that the Treasury is on the cusp of a major policy reversal that could deliver a much-needed boost to Britain’s retail and leisure industries.
The Office for Budget Responsibility (OBR) has been asked to “examine the costs and benefits” associated with Rishi Sunak’s decision to end tax-free shopping schemes for tourists in 2020.
Richard Hughes, chairman of the OBR, said the government spending watchdog would publish its conclusions alongside the Budget next month.
The review comes “in the light of subsequent evidence on international visitor numbers and their consumption patterns and the analysis carried out by a number of outside bodies”, Hughes said in a letter to Conservative backbencher Sir Geoffrey Robert Clifton-Brown.
As chancellor under Boris Johnson, Sunak announced that overseas visitors would no longer be able to reclaim VAT on shopping purchases.
The rationale behind the decision was that VAT-free shopping was little more than a “bung to millionaire Chinese tourists to get 20 per cent off a luxury handbag”, one Whitehall source said at the time.
The Treasury had estimated that restoring VAT-free shopping would cost the Exchequer £2 billion.
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