With the general election looming, increasingly the question is becoming one of judgement. Who do we trust to represent the country and with that, the economy? The UK economy is consumption led, meaning that what happens in retail and consumer goods and services, is significant, when looking at economic activity. With that, in what is turning out to be a spectacular own goal, the Government’s ill fated ‘tourist tax’ on retail (not allowing VAT rebates on shopping) is starting to be felt amongst retailers.

Indeed, in a recent study by the Association of International retail, 63% of international tourists would be more likely to make large purchases in the UK if tax-free shopping was re-introduced. Looking at before the tax was changed, 162,000 tourists from outside the EU applied for the VAT rebate in the UK in 2019. The estimate is that this is down by over 20% in the last year. More so from specific countries, for example, whilst spending from US tourists has remained the same, it has increased in France and Spain by 183% and 174% respectively.

This is directly impacting the retail economy which for the Government should be more of a cause of concern. After all, there are over 3.5m people employed in retail in the UK, which for context, is over 15% of the entire private sector, in terms of employment. Anything which is going to depress employment in the sector, will only result in lower income tax, lower corporation tax and lower business rates.

For the Government, the challenge of course is balancing the books, but increasingly their emphasis on increasing tax on foreigners, whilst it may be good politics (no votes lost) be it for shopping or non-doms, just seems to be bad economics. Whether Labour are any different, is the big question.