Delivering a tax system that works in the best interests of the UK and our economy
On the 3rd of February I made a speech in the House of Commons as part of the debate on a set of new rules and regulations for taxes and duties related to international travel. These were made through Statutory Instruments (SI's), these allow for precise details of regulations to be changed without having to change the entire original Act itself.
The SI's being debated brought in several new rules that were either necessitated by, or possible because of, our departure from the EU's Single Market and Customs Union. This included new tax-free limits for alcohol and tobacco purchased for personal use in Europe, previously not possible due to the EU's requirement to pay tax on all products purchased and consumed within the Single Market.
The return of the "booze cruise" has the potential to significantly boost our regional travel and tourism industry across the UK, as well as the places we choose to visit.
The main focus of my speech was the removal of the VAT Retail Export Scheme, or VAT RES. This is not a well-known scheme in the UK, as it was a tax break given to foreign nationals (previously only non-EU nationals) on purchases made on the high street which they take home with them in their luggage. The extension of this VAT refund to all international visitors following Brexit would have resulted in a £1.4 billion loss to the Treasury, contributing very little to the economy in the process.
I believe in a fair tax system that works in the best interests of the UK and our economy, which is why I spoke in favour of the SI's proposed by the Government.
Exiting the European Union (Excise)
"I am sure that every Member of the House would want the UK to have a fair and dynamic tax system that responds to the needs of UK citizens and reflects the economic circumstances of the time. In order to achieve that, our tax regulations must evolve and adapt, supporting society’s wider objectives and strengthening our local and national finances.
It is impossible not to recognise the enormous changes that have taken place in UK society over the past year. Even if we were to set aside the impact of the pandemic, in the hope that we will soon be able to return to what used to be normal life, the nature of the UK’s place in the world has changed - as has the way we interact with our global friends and partners. The removal of the VAT retail export scheme is a recognition of that change. We have left the EU and its customs union, and now find ourselves in a position to re-evaluate how we choose to apply taxes and duties to consumers engaging in international travel. We have the chance to treat people from different countries in the world equally, with no inherent tax status attached to being an EU visitor to the UK, compared with being a visitor from anywhere else.
A fair tax system should not allow wealthy international travellers relief from local taxes, as if they simply arrive, make purchases, and leave the UK again without any other interaction with our economy. Those visitors benefit from a vibrant and thriving UK economy, our infrastructure and our connectivity, and our economy relies on everyone paying their share of tax. We do not give VAT refunds for hotel rooms, meals out, or theatre tickets, so why should a handbag or new coat be treated any differently? Consumer goods that are purchased in the UK should be subject to normal UK tax rules, and that should apply regardless of the country in which the purchaser happens to pay their income tax.
That is not to say that people are not welcome to come and spend their money here in the UK. We have some outstanding retail opportunities, and I hope that many people from around the world will visit this country again, once it is safe to do so. But it is not unreasonable to expect those visitors to pay a small amount in the process. It is also the case that, even for those who did use VAT RES, once the administration costs had been included, the savings accounted for less than 6% of the total trip costs on average. Given the wealth of those using the scheme, it is highly unlikely that the existing scheme affected their decision to travel to or shop in the UK. In fact, the USA, which has no countrywide VAT RES scheme, is the top country outside Asia on China’s most-visited list, ahead of any European countries that do have tax-free shopping.
International travel and high-end retail are luxuries, and it is wrong to deprive UK taxpayers in places such as Penistone and Stocksbridge to benefit international travellers. Preventing a loss to our tax base to the tune of £1.4 billion will help us to spread the benefits of international travel across the whole UK, instead of, as at present, concentrating it in London and the south-east.
On a final note, I am pleased that this statutory instrument provides duty-free sales for UK residents visiting the EU, for the first time in 20 years. The UK travel industry has suffered enormously over the past year, and this measure will support regional airports and ports across the country. Many more UK residents travel to EU than non-EU destinations in normal times, so the changes to duty free should significantly benefit local economies as well as, of course, consumers."
The regulations implemented by this statutory instrument are fair to the UK taxpayer, fair to travellers and fair to consumers, and as fairness should be at the heart of our tax system, I am pleased to support it.
