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Heathrow Urges Government to Reinstate VAT-Free Shopping to Boost UK Aviation Competitiveness

May 14, 2024

Heathrow Airport has voiced strong criticism against the UK government, accusing it of stifling the global competitiveness of the aviation industry by failing to reinstate VAT-free shopping for foreign visitors.

The airport’s condemnation comes amidst concerns raised by business leaders over the absence of tax-free shopping privileges, a move initiated by former Chancellor Rishi Sunak in 2021.

In addition to the discontinuation of VAT-free shopping, Heathrow also pointed to other measures, including the imposition of a £10 fee for certain transiting passengers and the proposed increase in business rates, as significant obstacles hampering the UK aviation sector’s ability to compete effectively on the international stage.

The introduction of the electronic travel authorisation (ETA) scheme further compounds the challenges faced by the aviation industry. Initially implemented in November last year for select countries, the ETA scheme is slated for expansion to include additional regions, with implications for both passengers and airport operations.

Despite recording 6.7 million passengers in the last month and a notable uptick in flight activity, Heathrow remains critical of the government’s policy stance. The airport highlights the detrimental impact of current measures on the UK’s global connectivity and underscores the urgent need for a comprehensive, cross-government approach to policymaking that fosters the competitiveness of the aviation sector.

Chancellor Jeremy Hunt’s decision to uphold the VAT policy following a review by the Office for Budget Responsibility (OBR) underscores the government’s reluctance to reconsider its position. Despite calls from business leaders for the restoration of VAT-free shopping, the government maintains its stance, citing fiscal considerations outlined by the OBR.

Heathrow’s stance reflects broader concerns within the aviation industry regarding the regulatory environment and its implications for future growth and competitiveness. As the sector grapples with evolving challenges, including ongoing pandemic-related disruptions, the call for policy reforms to support industry resilience and global connectivity remains paramount.