Rishi Sunak to cost holidaymakers £12m with new VAT hike ‘Kick in the teeth’

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The TaxPayers Alliance said the move is a “kick in the teeth” for sun worshippers desperate for a well-earned break, especially after being unable to fly overseas for much of this year due to Covid-19.

Plummeting demand this year has seen a notable impact on the travel industry, with Heathrow airport seeing massive falls in retail revenues of 56 per cent during the first six months of 2020.

The controversial price hike is part of a wider package of tax announcements which has been opposed by MPs.

It also includes stopping international visitors benefiting from tax-free shopping on the UK’s high streets.

This incentive has helped to attract thousands of tourists to Britain each year and created jobs across the country.

The TPA says that together these measures could also have a disastrous impact on the economy, particularly on sectors that have struggled profoundly during the pandemic.

Conservative MP, Sir Geoffrey Clifton-Brown, said: “Alongside the wider economic impact of the VAT changes, this move will hit British taxpayers in the pocket.

“Abolishing tax free sales on airport goods like electronics, food and clothing will see a £12 million tax hike on future holidays, with knock on impacts for the retailers and airports who are already struggling. We need to encourage as many visitors as possible from around the world to come to the UK to help support tourism and related businesses in areas like the Cotswolds and elsewhere.

 

“This is the worst possible time to be hiking taxes on the Brits who may venture abroad next year, and makes the prospect of recovery for the travel industry even more remote.

“But it would be one piece of really cheerful news in the middle of the covid pandemic for UK travellers to Europe to be able to have the prospect of duty free shopping.”

Last month the government announced that from January 2021, duty free purchases will be extended to British passengers travelling to EU countries.

However, tax-free sales in airports of some goods – such as electronics and clothing – will end for passengers travelling to non-EU countries.

Such a change could mean that the UK is the only country in Europe not offering tax-free shopping.

 

If this change is implemented at the end of the Brexit transition period, this could cost UK residents who fly to non-EU countries an extra £12.1 million in tax each year.

According to York Aviation, the impact of the change could also lower UK GDP by over £2 billion and lead to 19,400 job losses.

Duncan Simpson, research director of the TaxPayers’ Alliance, said: “Some of these VAT changes will heap more misery on embattled holidaymakers and a struggling sector.

“Hiking holiday prices at the same time as making the UK a less competitive place for international shoppers could cost thousands of jobs and damage growth, with the travel industry already on its knees from the coronavirus crisis.

“Ministers must get their heads out of the clouds and pause these changes before it’s too late.”

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