Heathrow accuses Sunak of tarnishing Britain’s reputation with tourist tax

Sir Jacob Rees-Mogg, a former business secretary, said: “It [the tourist tax] costs more than it raises. It’s an economically inefficient tax. Foreign visitors coming and spending money on all sorts of other things is very beneficial, so I would certainly encourage the Government to scrap it.

“If the Treasury took a more dynamic approach, they would realise that this tax costs both the economy and the Treasury money.”

Sir Iain Duncan Smith, the former leader of the Conservative Party, also called for the Chancellor to reinstate tax-free shopping for visitors and warned its removal has had ripple effects across the wider economy.

Tax-free shopping encouraged visitors to stay longer and spend more, Sir Iain said. “Now that it’s going to cost them extra, they can’t see the point because they get it cheaper in Milan and Paris,” he added.

“The Treasury didn’t really realise, or if they did then they were complacent, how much else we’re losing.

“If you talk to hoteliers, their takings are down. If you talk to restaurants in those key areas, their takings are down. It’s the same with theatres. Our loss is Paris’s gain.”

Retailers have called for the tourist tax to be scrapped before the Paris Olympics amid concerns that France will be seeking to lure even more spending away from the UK this summer.

Figures from the Centre for Economics and Business Research (Cebr) released last month suggested that Britain has already been dealt a greater-than-expected blow from the tourist tax.

The think tank said the policy cost Britain £11.1bn in lost GDP last year, £400m more than previous expectations of £10.7bn.

A Treasury source said: “In the Autumn Statement, we said we’d be open to submissions from industry data. But ultimately, we’re in a tight fiscal position. It’s very probable that we won’t be able to make as big tax cuts as we did in the autumn and the priority for us is obviously in an election year to focus on rewarding work through the tax system.

A spokesman for the department added: “We keep all taxes under review and recognise the value that retailers bring to Britain. That is why we announced a £4.3bn business rates package at Autumn Statement to support businesses and the high street.

“VAT-free shopping remains available for all non-UK visitors buying items in store and having them sent directly to their overseas address.”

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