Exiting the European Union (Excise) — House of Commons, 2021-02-03
Topic: Foreign Trade
Olukemi Olufunto Badenoch (Conservative, Centre-right): Britain’s departure from the European Union brings with it the freedom to reintroduce duty-free sales and make other tax changes that will deliver Brexit benefits to British tourists. Such gains have been enacted by the Travellers’ Allowances and Miscellaneous Provisions (EU Exit) Regulations 2020, which also introduced crucial changes to the VAT and excise rules for passengers following the transition period The new rules form a carefully considered package of measures that was introduced following a wide-ranging consultation. The changes take into consideration the Government’s aim of minimising disruption at the border, along with World Trade Organisation commitments that require the Government to align the treatment of passengers travelling to and from the EU and non-EU countries The provisions in the SI ensure the smooth flow of passengers entering Great Britain by reducing the need for them to stop at the border to declare goods that they have purchased. My hon. Friend the Member for North Norfolk (Duncan Baker) elaborated on how, from his personal experience, the measure removes bureaucracy. Without the instrument, EU and non-EU passengers would be treated differently, traveller flow at the border would be disrupted and the UK would breach its international obligations under World Trade Organisation law The measures I shall outline will have a hugely positive impact on UK travellers for a number of reasons. As my hon. Friend the Member for South Ribble (Katherine Fletcher) said, for the first time in more than two decades, the tens of millions of UK passengers who visit the EU every year—in non-pandemic times—will be able to enjoy duty-free sales. For example, with UK excise duty no longer due, a 1 litre bottle of Scotch could be around £11.50 cheaper In addition, we have quadrupled the alcohol allowance for passengers arriving in Great Britain, making it one of the most generous in the world. Under the new rules, passengers will be allowed to bring into Great Britain three crates of beer, two cases of wine and one case of champagne for personal use without having to pay the relevant taxes. This represents an excise duty saving of up to £120. My hon. Friend the Member for Dover (Mrs Elphicke) praised of the significance of such measures to her constituency, which has a port for travel straight to the EU I recognise the concerns expressed by the hon. Members for Paisley and Renfrewshire North (Gavin Newlands) and for Gordon (Richard Thomson), along with others, about the ending of the VAT retail export scheme and the removal of tax-free airside sales. Although the latter policy change on tax-free airside sales is not actually part of this instrument, let me explain our thinking behind the decisions In simple terms, the maintenance of the VAT RES and tax-free airside sales after the end of the transition period was never an option for the Government. In reality, the choice we faced was between extending the schemes to all EU travellers or removing them both completely, because the World Trade Organisation rules specify that goods bound for different destinations must be treated the same. However, because EU visitors have never benefited from the VAT RES and still spend in UK shops without it, to extend it now would present a large dead-weight loss, and in effect the Government would be subsidising the shopping of EU visitors. I am sure hon. Members would agree that this would be an unwise use of taxpayers’ hard-earned cash My hon. Friend the Member for South Cambridgeshire (Anthony Browne) set out clearly and concisely why this was not a fair and efficient use of taxpayers’ money, and I thank him for making such a well-argued case. In addition, data and evidence submitted as part of the Government’s consultation demonstrated that the VAT RES disproportionately benefited London and the south-east of England. In fact, around 90% of sales were made in London and Bicester Village in Oxfordshire. My hon. Friend the Member for Penistone and Stocksbridge (Miriam Cates) made the excellent point that other regions and, in particular, smaller high streets did not appear to gain as much, if at all I take the point made by my hon. Friend the Member for Kensington (Felicity Buchan). She and I have had several discussions on this issue and I have also had extensive representations from my hon. Friend the Member for Moray (Douglas Ross). However, they will both know that the Treasury disagrees with their assessments. The Office for Budget Responsibility estimates that the withdrawal of the VAT RES will result in a significant direct Exchequer saving of £1.84 billion in just over five years. In addition, the OBR estimates that the withdrawal of tax-free airside sales will result in a saving of £780 million over the same period.