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Increasing the value of tax free

shopping for EU destination
economies
A Cebr report for Refundit

October 2021
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Overview
The Centre for Economics and Business Research (CEBR) has investigated the impact of tax-free shopping in
Europe on the economy of several EU member states. Specifically, this analysis looks at the potential econom-
ic gains associated with replacing the current tax-free shopping model with an open, fully digital, app based,
consumer-focused alternative. The analysis hinges on a change in legislation such that consumers can claim
refunds for eligible purchases directly from an operator, eliminating the need for merchants to enter into a
relationship with the operators, which currently works as a bottleneck in the system. The aim of moving to this
system is to enable more tourists and more merchants to benefit from tax-free shopping, and the benefits of
such a change would disproportionately apply to merchants away from the capital cities and tourist hotspots
which are effectively excluded from participating in the current tax-free shopping scheme.

Main findings
In all countries it was found that allowing for a consumer-centric fully digital, app-based system will have a
considerable positive effect on government income, despite the loss of VAT revenues.

Country-specific main findings

The Czech Republic

• Spending eligible for tax-free shopping is estimated to have stood at CZK 21.0 billion in 2018;
• Depending on the take-up rate, between CZK 2.2 billion and CZK 4.4 billion of this would be returned to
customers in the form of VAT refunds under the new TFS scheme;
• On a per visitor basis, these VAT refunds would reduce the cost of a visit to Czechia by approximately %2.0
to %4.0;
• Based on the elasticity of demand for international travel with respect to price, this cost reduction would
increase visitor numbers by between 150,000 and 301,000;
• These additional visitors would spend between CZK 2.9 billion and CZK 5.7 billion;
• Visitor spending patterns would also be impacted by the effective cost reduction. This would have
produced further additional spending of CZK 3.5 billion to CZK 7.1 billion;
• The total increase in spending as a result of the scheme would thus range between CZK 6.4 billion and CZK
12.8 billion;
• This additional spending would have fed into higher output levels via the tourist spending multiplier. This
would amount to an increase in GDP of between CZK 16.3 billion and CZK 32.6 billion;
• Taking into account Czechia’s tax-to-GDP ratio, this increase to GDP would increase tax revenues by CZK
5.8 billion to CZK 11.5 billion;
• The introduction of an open, consumer-focused tax-free shopping scheme would have a net positive effect
on government tax revenues. The additional revenues generated would outweigh the losses associated
with sales tax refunds by CZK 3.6 billion to CZK 7.1 billion.
• We estimate that on average the scheme will return CZK 3.9 to the Ministry of Finance for every CZK 1 lost
in VAT revenues.
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Croatia

• Spending eligible for tax-free shopping is estimated to have stood at HRK 2.5 billion in 2019;
• Depending on the take-up rate, between HRK 0.3 billion and HRK 0.6 billion of this would be returned to
customers in the form of VAT refunds under the new TFS scheme;
• On a per visitor basis, these VAT refunds would reduce the cost of a visit to Croatia by approximately %1.5
to %2.9;
• Based on the elasticity of demand for international travel with respect to price, this cost reduction would
increase visitor numbers by between 96,000 and 192,000;
• These additional visitors would spend between HRK 402 million and HRK 804 million;
• Visitor spending patterns would also be impacted by the effective cost reduction. This would have
produced further additional spending of HRK 495 million to HRK 990 million;
• The total increase in spending as a result of the scheme would thus range between HRK 897 million and
HRK 1.8 billion;
• This additional spending would have fed into higher output levels via the tourist spending multiplier. This
would amount to an increase in GDP of between HRK 1.0 billion and HRK 1.9 billion;
• Taking into account Croatia’s tax-to-GDP ratio, this increase to GDP would increase tax revenues by HRK
371 million to HRK 743 million;
• The introduction of an open, consumer-focused tax-free shopping scheme would have a net positive effect
on government tax revenues. The additional revenues generated would outweigh the losses associated
with sales tax refunds by HRK 62 million to HRK 124 million.

France

• Spending eligible for tax-free shopping is estimated to have stood at 6.4€ billion in 2018;
• Depending on the take-up rate, between 0.6€ billion and 1.3€ billion of this would be returned to
customers in the form of VAT refunds under the new TFS scheme;
• On a per visitor basis, these VAT refunds would reduce the cost of a visit to France by approximately %3.1
to %6.3;
• Based on the elasticity of demand for international travel with respect to price, this cost reduction would
increase visitor numbers by between 2.5 million and 4.9 million;
• These additional visitors would spend between 827€ million and 1.7€ billion;
• Visitor spending patterns would also be impacted by the effective cost reduction. This would have
produced further additional spending of 1.0€ billion to 2.0€ billion;
• The total increase in spending as a result of the scheme would thus range between 1.8€ billion and 3.7€
billion;
• This additional spending would have fed into higher output levels via the tourist spending multiplier. This
would amount to an increase in GDP of between 6.5€ billion and 12.9€ billion;
• Taking into account France’s tax-to-GDP ratio, this increase to GDP would increase tax revenues by 3.0€
billion to 6.0€ billion;
• The introduction of an open, consumer-focused tax-free shopping scheme would have a net positive effect
on government tax revenues. The additional revenues generated would outweigh the losses associated
with sales tax refunds by 2.3€ billion to 4.7€ billion.
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Greece

• Spending eligible for tax-free shopping is estimated to have stood at 2.1€ billion in 2019;
• Depending on the take-up rate, between 0.2€ billion and 0.5€ billion of this would be returned to
customers in the form of VAT refunds under the new TFS scheme;
• On a per visitor basis, these VAT refunds would reduce the cost of a visit to Greece by approximately %2.8
to %5.7;
• Based on the elasticity of demand for international travel with respect to price, this cost reduction would
increase visitor numbers by between 472,000 and 945,000;
• These additional visitors would spend between 321€ million and 643€ million;
• Visitor spending patterns would also be impacted by the effective cost reduction. This would have
produced further additional spending of 396€ million to 791€ million;
• The total increase in spending as a result of the scheme would thus range between 717€ million and 1.4€
billion;
• This additional spending would have fed into higher output levels via the tourist spending multiplier. This
would amount to an increase in GDP of between 1.0€ billion and 2.1€ billion;
• Taking into account Greece’s tax-to-GDP ratio, this increase to GDP would increase tax revenues by 402€
million to 805€ million;
• The introduction of an open, consumer-focused tax-free shopping scheme would have a net positive effect
on government tax revenues. The additional revenues generated would outweigh the losses associated
with sales tax refunds by 155€ million to 311€ million.

Norway

• Spending eligible for tax-free shopping is estimated to have stood at NOK 4.8 billion in 2018;
• Depending on the take-up rate, between NOK 0.6 billion and NOK 1.2 billion of this would be returned to
customers in the form of VAT refunds under the new TFS scheme;
• On a per visitor basis, these VAT refunds would reduce the cost of a visit to Norway by approximately %1.3
to %2.6;
• Based on the elasticity of demand for international travel with respect to price, this cost reduction would
increase visitor numbers by between 76,000 and 151,000;
• These additional visitors would spend between NOK 780 million and NOK 1.6 billion;
• Visitor spending patterns would also be impacted by the effective cost reduction. This would have
produced further additional spending of NOK 960 million to NOK 1.9 billion;
• The total increase in spending as a result of the scheme would thus range between NOK 1.7 billion and
NOK 3.5 billion;
• This additional spending would have fed into higher output levels via the tourist spending multiplier. This
would amount to an increase in GDP of between NOK 6.6 billion and NOK 13.3 billion;
• Taking into account Norway’s tax-to-GDP ratio, this increase to GDP would increase tax revenues by NOK
2.6 billion to NOK 5.2 billion;
• The introduction of an open, consumer-focused tax-free shopping scheme would have a net positive effect
on government tax revenues. The additional revenues generated would outweigh the losses associated
with sales tax refunds by NOK 2.0 billion to NOK 4.0 billion.
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Portugal

• Spending eligible for tax-free shopping is estimated to have stood at 1.3€ billion in 2019;
• Depending on the take-up rate, between 0.15€ billion and 0.3€ billion of this would be returned to
customers in the form of VAT refunds under the new TFS scheme;
• On a per visitor basis, these VAT refunds would reduce the cost of a visit to Portugal by approximately %1.6
to %3.2;
• Based on the elasticity of demand for international travel with respect to price, this cost reduction would
increase visitor numbers by between 158,000 and 315,000;
• These additional visitors would spend between 196€ million and 392€ million;
• Visitor spending patterns would also be impacted by the effective cost reduction. This would have
produced further additional spending of 241€ million to 482€ million;
• The total increase in spending as a result of the scheme would thus range between 437€ million and 874€
million;
• This additional spending would have fed into higher output levels via the tourist spending multiplier. This
would amount to an increase in GDP of between 1.4€ billion and 2.9€ billion;
• Taking into account Portugal’s tax-to-GDP ratio, this increase to GDP would increase tax revenues by 0.5€
billion to 1.0€ billion;
• The introduction of an open, consumer-focused tax-free shopping scheme would have a net positive effect
on government tax revenues. The additional revenues generated would outweigh the losses associated
with sales tax refunds by 0.35€ billion to 0.7€ billion.

Spain

• Spending eligible for tax-free shopping is estimated to have stood at 4.1€ billion in 2019;
• Depending on the take-up rate, between 430€ and 860€ million of this would be returned to customers in
the form of VAT refunds under the new TFS scheme;
• On a per visitor basis, these VAT refunds would reduce the cost of a visit to Spain by approximately %1.0 to
%1.9;
• Based on the elasticity of demand for international travel with respect to price, this cost reduction would
increase visitor numbers by between 419,000 and 838,000;
• These additional visitors would spend between 559€ million and 1.1€ billion;
• Visitor spending patterns would also be impacted by the effective cost reduction. This would have
produced further additional spending of 689€ million to 1.1€ billion;
• The total increase in spending as a result of the scheme would thus range between 1.2€ billion and 2.5€
billion;
• This additional spending would have fed into higher output levels via the tourist spending multiplier. This
would amount to an increase in GDP of between 3.6€ billion and 7.2€ billion;
• Taking into account Spain’s tax-to-GDP ratio, this increase to GDP would increase tax revenues by 1.2€
billion to 2.5€ billion;
• The introduction of an open, consumer-focused tax-free shopping scheme would have a net positive effect
on government tax revenues. The additional revenues generated would outweigh the losses associated
with sales tax refunds by 801€ million to 1.6€ billion.