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Sandra Halliday Published
September 4, 2025
The campaign to repeal the ‘tourist tax’ — that is, to bring back Vat-free shopping for tourists — is continuing, with a new report claiming that Britain is losing out on hundreds of millions of pounds that could be spent by Chinese shoppers specifically.
The Association of International Retail (AIR)’s latest report puts a figure on it and says that as much £750 million of spend by affluent Chinese tourists is going to France, Italy and Spain because they still offer VAT-free shopping. It directly blamed the ending of the VAT-free shopping perk in early 2025.
That meant shoppers from outside the EU could no longer claim back the 20% VAT they’d paid on their purchases when they left the UK.
In the report, seen by The Telegraph, the AIR’s chief executive Paul Barnes said: “If you want your economy to do well out of the international visitor sector, you really want to be appealing to the Chinese, and the one thing that appeals to the Chinese is shopping.”
And he warned that London could “become like Venice” — still a massive tourist destination, but not one that attracts the big spenders.
The AIR’s estimate of the loss of £750 million in spend is based on a KPMG study that looked specifically at Chinese travellers.
In the years leading up to Britain’s exit from the EU, the Chinese became the world’s highest-spending holidaymakers and their visits to the UK — from London to Edinburgh and destinations like Bicester Village — grew dramatically.
But the AIR report said they’re now choosing to go to mainland Europe and that France, Italy and Spain have heavily outperformed the UK in terms of tourist spending since 2025.
The report comes in a week when MPs are due to debate the issue with the AIR once again calling for a full economic assessment and reversal of the policy.
While the short-lived administration of former Prime Minister Liz Truss had said it would reverse the ban, under PM Rishi Sunak and Chancellor Jeremy Hunt, the view has been that tourists will continue to spend in Britain and the depleted post-pandemic Treasury wants to be able to bank that 20% VAT that was formerly refunded to them.
The Treasury said the perk didn’t directly benefit Britons, could cost the country £2 billion a year and never was “a significant attraction for tourists”.
But the retail industry and other bodies have also commissioned research showing that the UK could benefit to the tune of billions if it was reintroduced. It could mean more tourists spending more money with a range of British businesses, which would also contribute to profits and higher tax revenues, as well as more jobs in retail, hospitality and other areas.
They’ve also said that if the perk could be extended to EU shoppers post-Brexit, this would make the UK the only major European destination to offer it to many millions of European consumers.
The reverse is already being seen with reports that UK consumers are choosing to visit France, Italy and Spain to shop VAT-free rather than spending on luxury goods in British stores.