This study presents an assessment of the implications of reintroducing Tax-Free Shopping (TFS) in the UK.
The UK Government’s Autumn 2022 Growth Plan examined the potential reintroduction of tax-free shopping for non-EU27 and extending the scheme for EU27 visitors. HM Treasury estimated that implementing this scheme would incur costs to the Exchequer of £1.3 billion in 2024/25 and £2.0 billion in 2025/26, based on anticipated VAT refunds. However, these estimates did not account for the impact on visitor incentives.
To evaluate the consequences, the Association of International Retail (AIR) commissioned Oxford Economics to conduct an independent assessment.
According to our research, the actual fiscal cost of implementing tax-free shopping in the UK would be over 70% lower than HM Treasury’s estimate. This discrepancy is due to both an expected overestimation of the value of refund claims and the failure to consider the policy’s influence on visitor behaviour.
Our modelling indicates that the economic footprint supported by the additional foreign visitor spending would offer a considerable boost to the UK tourism and wider economy, sustaining over 78,000 jobs and £4.1 billion in GDP. Whilst it would be reasonable to contest that this total contribution will not be fully additional, since it will incorporate some level of displacement, the fact that it is being supported by an increase in export revenue implies that the net boost to UK GDP will be significantly higher than a policy that incentivizes UK consumer spending.
To download the report, please complete the form below.
The experts behind the research
Anubhav and Henry, members of the economic consulting team, bring years of experience in quantitative economic analysis and original, evidence-based research, working with clients around the globe and across sectors.
Director, Economic Consulting
Read the report
Complete the form below to download the report.
You might also be interested in
Indian and SE Asian cities lead growth in household incomes
Asia-Pacific's fast-growing emerging cities are driving the continued expansion of the region's middle-income class and the reshaping of its consumption patterns. In previous decades that was driven by China's ascent to becoming an upper middle-income country, and the rapidly rising living standards of its urban residents.Find Out More
Four trends shaping long-term shifts in urban consumer markets
Our long-term income and consumer spending forecasts reveal the high-potential urban consumer markets of the future. We identify four key trends underpinning shifts across global urban consumer markets over the coming decades.Find Out More
To understand how organizations are staying ahead of changing consumer behavior, Oxford Economics and SAP surveyed 500 Chief Digital Officers, digital commerce leads, and other senior commerce executives during the second quarter of 2022. The survey sample included 250 executives from B2B organizations in the high tech, automotive, life sciences, industrial manufacturing, and wholesale distribution sectors.Find Out More
Australia: Black Friday boost to retail obscures underlying momentum
Black Friday sales are becoming a larger part of the retail landscape. In recent years, consumers are increasingly delaying purchases that would previously have been made in October and bringing forward December spending to capitalise on lower prices.Find Out More