LONDON, Sept 23 (Reuters) – Britain will bring back sales tax free shopping for overseas visitors to boost the country’s flagging retail sector, finance minister Kwasi Kwarteng said on Friday.
“Britain welcomes millions of tourists every year, and I want our high streets and airports, our ports and our shopping centres, to feel the economic benefit. So we have decided to introduce VAT-free shopping for overseas visitors,” he told parliament during the presentation of a mini-budget.
A previous tax-free shopping was abolished at the end of 2020. Kwarteng said the government would replace the previous paper-based system with a digital one. “And this will be in place as soon as possible.”
Linda Ellett, KPMG’s UK head of consumer markets, retail and leisure, said the move would increase the UK’s competitiveness when it comes to attracting international visitors.
“This is all the more key as we look to find ways to create economic growth, return international tourism to pre-pandemic volumes, and withstand rising inflation on the high street,” she said.
Below is a brief overview of the key measures announced in the mini-budget:
INCOME TAX CUTS
From April 2023 Britain will have a single higher rate of income tax of 40%, scrapping a previous higher 45% band. The basic rate of income tax would be cut to 19% in April 2023, one year earlier than expected.
STAMP DUTY CUT
Stamp duty, a tax on house purchases, will be cut to help families to afford to buy homes. The nil-band threshold for home movers will double to 250,000 pounds, while the nil-band threshold for first-time buyers will also increase to 425,000 from 300,000 pounds.
VAT-FREE SHOPPING FOR OVERSEAS VISITORS
Britain will introduce sales tax-free shopping for overseas visitors to boost the retail sector.
TAX INCENTIVES FOR INVESTMENT ZONES
Britain will introduce tax incentives for businesses in newly announced investment zones and liberalise planning rules for specified agreed sites.
CORPORATION TAX INCREASE SCRAPPED
Britain’s 19% corporation tax rate – the lowest among the G7 club of rich nations – had been due to rise to 25% in 2023 but the government decided to scrap those plans.
BANKER BONUSES CAP LIFTED
Caps on bankers’ bonuses will be scrapped to boost London’s post-Brexit competitiveness against financial capitals like New York and Hong Kong.
Kwarteng said the government will set out a more ambitious set of financial services reforms later in the year.
COST OF ENERGY BAILOUT
Kwarteng said Britain will spend about 60 billion pounds ($67 billion) on subsidising gas and electricity bills for the next six months for households and businesses.
TIGHTENING STRIKE RULES
The government would force transport companies to maintain a minimum level of service during strike action, and require pay offers to be put to members during pay negotiations.
PAYROLL TAX RISE REVERSED
The government on Thursday announced it was scrapping a 1.25 percentage point increase in payroll tax – or national insurance – that took effect earlier this year will be reversed from Nov. 6.
DIVIDEND TAX RISE SCRAPPED
An increase to dividend tax rates which had been brought in alongside the payroll tax increase – to raise contributions from those who are paid through different channels – will be scrapped from April 2023.
ONE OF THE MOST SIGNIFICANT INTERVENTIONS
“People will have seen the horrors of (Russian President Vladimir) Putin’s illegal invasion of Ukraine. They will have heard reports that their already-expensive energy bills could reach as high as 6,500 pounds ($7,253) next year. Mr Speaker, we were never going to let this happen. The prime minister has acted with great speed to announce one of the most significant interventions the British state has ever made.”
NEW APPROACH FOR NEW ERA
“Growth is not as high as it needs to be … We need a new approach for a new era, focused on growth. Our aim, over the medium term, is to reach a trend rate of growth of 2.5%. And our plan is to expand the supply side of the economy through tax incentives and reform.”
BARRIERS FOR ENTERPRISE
“There are too many barriers for enterprise. We need a new approach to break them down. That means reforming the supply side of our economy … (Our plans) will cover: the planning system, business regulations, childcare, immigration, agricultural productivity and digital infrastructure.”
STRIKE DISRUPTION UNACCEPTABLE
“At such a critical time for our economy, it is simply unacceptable that strike action is disrupting so many lives. Other European countries have minimum service levels to stop militant trade unions closing down transport networks during strikes. So we will do the same. And we will go further.”
BANKS SHOULD PAY TAXES IN LONDON, NOT PARIS OR NEW YORK
“We need global banks to create jobs here, invest here and pay taxes here in London, not Paris, not Frankfurt, not New York. All the bonus cap did was to push up the basic salaries of bankers, or drive activity outside Europe. It never capped total remuneration, so let’s not sit here and pretend otherwise. So we’re going to get rid of it.”
TAX CENTRAL TO SOLVING GROWTH RIDDLE
“We come to tax — central to solving the riddle of growth. The tax system is not simply about raising revenue for public services, vitally important though that is. Tax determines the incentives across our whole economy. And we believe that high taxes reduce incentives to work, they deter investment and they hinder enterprise.”
LOWEST CORPORATE TAX IN G20
“We will have the lowest rate of corporation tax in the G20. This will plough almost 19 billion pounds a year back into the economy. That’s 19 billion pounds for businesses to reinvest, create jobs, raise wages, or pay the dividends that support our pensions.”
($1 = 0.8962 pounds)
(Reporting by Sachin Ravikumar)