How a tourist tax could work and what happens next
WHILE overshadowed by the reaction to the 20mph default limit, the Welsh Government’s planned tourism tax is another piece of devolved legislation that has sparked debate. The government wants to introduce a visitor levy in Wales in the coming years.
There has been a backlash, with this mainly coming from the tourism and hospitality sectors, which fear it will deter visitors and burden them with additional bureaucracy. Tourism taxes are now fairly commonplace in parts of Europe and across the world, but the sectors will rightly point out that nearly all of these countries have lower VAT rates than the UK.
Those planning their trips this summer don’t need to worry about the added cost, as it is still in the planning stage.
Here we look at what we know so far about the levy and the questions that still need to be answered.
Will it apply across Wales?
While it is dubbed a Wales tourism tax/visitor levy, the final decision on implementing the new levy will come down to the individual local authorities. Unless that changes in the consultation period, then as an example Gwynedd could have a charge in place but neighbouring Conwy won’t.
It does mean that these powers will be in local hands but that could also lead to confusion – with many visitors believing any tax will cover the whole country. In theory, all 22 councils could implement it, or none, and only time will tell who will bring in the tax.
The tax will be on overnight stays in Wales – be that in a hotel, self-catering property or a caravan. It will not matter where the visitor is coming from and will also apply to Welsh people holidaying in the country. The frustration for those in the sector is that these are the people contributing the most to the economy per trip, compared to day-trippers who may add to the hustle and bustle of a honeypot location but sometimes contribute very little in economic terms.
The Welsh Government said there are significant challenges with applying a visitor levy to day visitors to a wide area, as compared to, say, a city like Venice.
Who will spend the money and what will it be spent on?
The Welsh Government says each local authority will make its own decisions on how the revenues are spent “to develop sustainable tourism in their local areas”. The sector wants assurances that the money raised will be ring-fenced to support enhancements in popular tourist areas. There are fears cash-strapped councils will instead use the money to cover other budgetary spending.
Estimates of potential revenue raised by a levy will be provided as part of the impact assessment process. A prelim study said revenue raised from a per-person per-night tax ranges from £14.2m for a tax of 50p to £113.2m for a tax of £4 – although this will all depend on how many local authorities implement a tax and the impact on visitor behaviour.
What’s the timeline?
As stated earlier, this will not be in place any time soon.
Legislation for a visitor levy will be introduced into the Senedd by the end of 2024. The Senedd will scrutinise and review the proposals, propose amendments and decide whether or not to approve the legislation by means of a vote.
The government said it is estimated that this decision will be made in 2025 – so within the current Senedd term. With Labour and Plaid backing the proposal, it is widely expected that it would be passed.
As stated, if the Senedd approves the legislation, it will then be for each local authority to decide if it wishes to start the process to introduce a levy. A local authority would need to consult with its communities to inform its decision.
If a local authority makes a decision to introduce a levy, there will be a notice period to ensure businesses and visitors are prepared. It is estimated that the earliest a visitor levy will be in place in any part of Wales is 2027.
How much will it be?
This remains an unknown at this stage. Initial research has found that rates charged around the world vary from 50p to £5 per night. Wales will need to decide how it moves forward, with a potential charge per room/unit or per person staying.
It is widely expected there will be a sliding scale, with cheaper accommodation carrying a lower levy and higher rates on more expensive rooms. Whether there will be flat Wales-wide rates or if local authorities can choose the amount they can charge is not known.
What will the economic impact be?
Last year the Welsh Government said it “will assess the potential economic impacts, as well as broader environmental, social and cultural impacts, of implementing a visitor levy in Wales”.
Tourism-related expenditure was more than £5bn in 2019 – a major contributor to the country’s GDP.
The Welsh Government has said there is little evidence to suggest visitor levies have a negative economic impact where they are proportionate.
An initial report did conclude that for every 1% increase in cost there was on average a near 1% drop in demand. When it came to a tax specifically on tourism accommodation, this went to -0.7%.
Further research is now being undertaken on the impact. full economic
Why is the Welsh Government introducing the levy?
The government says it believes it is “fair and reasonable to ask visitors to make a small contribution towards the wider costs of tourism”. It added: “Where a levy is used in Wales, it should encourage a more sustainable approach to tourism. We know that tourism plays a vital role in supporting local economies. But unbalanced, poorly supported tourism can also put pressure on local communities and undermine the high-quality amenities we all want to experience and to offer our visitors.”
How will it be collected and enforced?
This is part of the research now being done by the Welsh Revenue Authority (WRA), which is responsible for collecting taxes levied by the devolved government.
It said its aim is to discover what a visitor levy service might look like for Wales, and what the implementation options are.