(Spain) Improving tourist VAT refunds could increase spending by 135%.

The good figures collected at Easter have shown the clear recovery of the Tourism Sector and Tourism spending. In this sense, the democratisation of the tourist VAT refund system could increase tourist spending per transaction by 135%.

According to INE data, the total expenditure made by international tourists who visited Spain last March reached 5,069 million euros, which represents an increase of 832% compared to the same month in 2021, with an average expenditure per tourist of 1,257 euros.This increase in tourism expenditure represents an opportunity to accelerate the recovery and create support measures that will boost the increase of tourism in Spain in the long term.

In particular, a change in the current tourist VAT refund rules in Spain could have a very positive impact on the Spanish economy, stimulating the tourism industry and small Spanish businesses by attracting more visitors and promoting even more spending. A report by SigmaDos and Refundit shows that while 56% of retailers are aware of the right of non-EU visitors to a VAT refund on goods purchased in the country, currently only 20% of retailers offer this option to their non-EU customers.

The rules prevent consumers from applying directly to an operating entity for a VAT refund on eligible purchases, as it is the shops that must have a prior affiliation contract with the entities. This leaves out small and medium-sized businesses, due to the complexity of the current system, which so far only benefits mostly large businesses and luxury shops, impacting on economic recovery. Refundit explains that the change in the regulation of tourist VAT refunds would especially benefit traders who are currently excluded from the system in all the territories of our country, beyond cities like Madrid and Barcelona and other tourist centres.

Furthermore, a CEBR study carried out for the technology company Refundit reveals that the democratisation of the tourist VAT refund system could increase tourist spending per transaction by up to 135%. It also points out that, although the ability to shop is only one factor in travellers’ choice of destination, the fact that many items are available at cheaper prices with a duty-free shopping scheme than without it means that, all other things being equal, tourists are more likely to visit the country.

In addition to the direct impact of duty-free shopping as a stimulus to visitors and their spending, there are other potential benefits for the rest of the economy as a whole. For example, the interaction of Tourism and retail with other sectors of the economy produces a multiplier effect, meaning that, proportionately, each monetary unit spent on duty-free shopping funds a higher level of wider economic activity. In this sense, the additional spending would have contributed to higher levels of output through the tourism spending multiplier, leading to an increase in GDP of between 3.6 and 7.2 billion euros.