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Government should provide cost benefit analysis of its VAT increases

8 October 2020

The Government announced in September 2020 that in January 2021 it will end the VAT Retail Export Scheme (RES), which allows non-EU visitors to the UK to claim a VAT refund from customs when leaving the country.

By effectively abolishing tax-free shopping for non-EU visitors to the UK, the Committee has heard evidence that ending VAT RES will lead to fewer high-value tourists visiting the UK from places such as America, China and the Middle East.

The Government also announced that alcohol and tobacco will be available duty and VAT free when travelling abroad from January 2021, but the Airside Extra Statutory Concession (ESC), which allows people to buy other goods VAT free when through security controls, will be abolished.

Following a Treasury Committee evidence session yesterday, which considered these issues, Rt Hon. Mel Stride MP, Chair of the Treasury Committee, has written to Rt Hon. Rishi Sunak MP, Chancellor of the Exchequer, to ask for the cost benefit analysis behind these decisions.

Chair's comments

Commenting on the correspondence, Mr Stride said:

“The Committee has been told that this will be a major blow to many retailers serving the struggling tourism sector. It could be seen as the UK imposing a tariff on its own exports.

“Witnesses in a Treasury Committee evidence session yesterday raised concerns about the Government’s consultation that drove these changes to VAT.

“I’ve asked the Chancellor to provide the Committee with the cost benefit analysis behind these decisions so that we can consider these issues further.”

Further information

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