The VAT Retail Export Scheme was withdrawn after December 2020 despite protests from retailers and from Global Blue, the company that specialises in obtaining VAT rebates for tourists.
Post Brexit the government would eventually have had to extend the scheme to tourists from the EU as well as from outside the area. Paradoxically, because of the Northern Ireland Protocol, the scheme still exists in Northern Ireland.
The government has claimed that the abolition of the scheme will generate increased revenues (it’s estimate is £0.5 billion) at minimal cost to the economy and that the extension of the scheme to EU visitors would have cost further tax revenue.
The industry, citing reports by my Cebr colleagues and by other consultants, says that the scheme increases tourism and tourist spending and because of this generates increased tax revenues, not a reduction. The Cebr estimate is the withdrawal of the scheme has cost about 1.2 million lost tourists, about £3 billion lost GDP and that tax revenue far from being increased will be reduced by about £700 million. Cebr also estimates that had the scheme been extended, further tourism would have been generated, further spending and further tax revenues.
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