Rachel Reeves was last night urged to bring back tax-free shopping to boost economic growth.
In a new report, the Growth Commission think tank says scrapping the hated ‘tourist tax’ in next week’s Budget would add 0.4 per cent to GDP by the end of the decade – equal to £10.8 billion.
The commission, which was launched by Liz Truss last year, calls on Ms Reeves to abandon her plans for sweeping tax increases next week, warning they could set the economy back by years.
It backs Labour’s drive to cut planning red tape, but urges ministers to go further by requiring councils to assess the impact on economic growth when considering applications for development.
But it calls for it to be backed by a string of tax cuts to boost investment and growth, including the abolition of inheritance tax, a reduction in corporation tax to 15 per cent, and end to the freeze on tax thresholds and the resumption of tax-free shopping.
Rachel Reeves has been urged to scrap the ‘tourist tax’ and bring back tax-free shopping for visitors
A new report has suggested that scrapping the tax would add 0.4 per cent to GDP by the end of the decade – equal to £10.8 billion (file photo)
Tax-raising measures reportedly being considered by Ms Reeves including a hike to capital gains tax, removing non dom status and a rise to employers’ NI contributions, could see GDP drop by 8.8 per cent by the end of the decade, the study warns (file photo)
The study says a pro-growth, tax-cutting package, coupled with a cut in net migration to 150,000 a year, could boost GDP by 15 per cent by 2030 and almost double this amount by 2045.
But it warns that tax-raising measures reportedly being considered by Ms Reeves, such as hikes to capital gains tax, the scrapping of foreign non dom status and a two per cent rise in employers’ National Insurance contributions, could put the recovery in reverse and lead to a fall in GDP of 8.8 per cent by the end of the decade.
Economist Douglas McWilliams, who helped prepare the report, said: ‘Trying to run an economy on sharply higher taxes on business and capital is like trying to run a car on no oil – the engine may run on for a few miles, but you know it will eventually seize up.’
The Mail revealed yesterday that 300 firms have written to Ms Reeves urging her to scrap the ‘tourist tax’.
The group, comprising some of Britain’s biggest retailers, hotels and hospitality firms, warned that removing the 20 per cent VAT refund for foreign tourists has proved a ‘spectacular own goal’, with many choosing to visit cities like Paris and Milan instead, taking their custom with them.