What are tourist taxes?
Tourist taxes are not new and have been around in different forms for decades across different destinations around the world, though with many more being setup in recent years. These taxes can vary, but most commonly they relate to modest charges applied to stays at paid visitor accommodation on top of the normal cost of a stay. These taxes, and their rates, are generally set locally. Other types of tourist taxes also exist - such as taxes applied on arriving or departing passengers, or eco-related taxes.
At the Autumn Budget, the Chancellor Rachel Reeves announced plans to give locally-elected mayors the powers to enforce a tax on tourists for staying overnight, with revenues to be reinvested in local areas such as through infrastructure and events.
Are these taxes new in the UK?
The powers announced in the Budget, which are subject to consultation, are new and are expected to give Mayoral Strategic Authorities in England additional powers. However, they are not completely new, with similar taxes in Scotland and Wales both set to be launched next year.
To date, there have been some other mechanisms to impose a levy on visitors, however, these can be complex. A legal workaround called an Accommodation Business Improvement District (ABID) allows local charges for certain hotels and serviced accommodation, but not all visitor properties. In Manchester, a 'city visitor charge' of £1 per room per night is applied, while some other cities such as Liverpool also have similar charges.
What has the reaction been to the new powers?
The reaction to the announcement of new powers for Mayors to enforce a local tourist tax has been mixed. Some mayors, such as Mayor of Greater Manchester Andy Burnham have welcomed the news, while others such as Mayor of Tees Valley Ben Houchen have said they won't be imposing a tourist tax on their places. There have also been questions raised around how best to spend or share revenues in city region areas, with larger volumes of visitor accommodation tending to be clustered in urban centres.
Some local areas, political parties and some businesses in sectors such as the hospitality industry have raised concerns over the potential for local taxes, warning over possible impacts such as deterring tourists due to extra costs. The exact impacts could potentially vary by place, such as if there are no taxes in close neighbouring areas - however, research on places where tourist taxes have been implemented have often been inconclusive when looking at impacts on tourist numbers as a direct result of such levies.
What is the international precedent for tourist taxes?
Tourist taxes are increasingly a norm in international destinations, with many towns and cities adding small charges per person or per room, for each night stayed.
A variety of European destinations have fairly long-standing tourist taxes such as Berlin which set up a hotel occupancy tax in 2014, Rome which introduced a tax in 2011, and Catalonia introduced a regional tourist tax in 2012. Further afield, Dubai introduced per-night taxation in 2014, Malaysia introduced a tourist tax in 2017, while Los Angeles introduced the Transient Occupancy Tax as far back as the 1960s - although it has evolved significantly since. Beyond major cities, tourism taxes are also becoming more common in smaller cities and can help bring in revenue to support local priorities.
The cost of tourist taxes varies across different destinations. Some destinations have favoured a flat fee per room and night, while other places use percentage charges on top of room rates. The rate of taxes can also vary based on the type of accommodation in some places. In many European destinations, overnight stays are generally not taxed at more than £1-£5, however, fees can vary significantly elsewhere. Alternative taxation models also exist - such as the day-visitors fee in Venice.
What should local places consider when thinking about implementing a tourist tax?
At GC Insight our team are involved in the development and monitoring of visitor economy charges in local places. Based on this experience, some of the key things local places should aim to consider include:
Interested to learn more about visitor economy levies? Get in touch with our Destination Team for a chat.
