A local tourism levy for Wales: your questions answered

Published 19/05/2022   |   Reading Time minutes

This week is Wales Tourism Week. Before the pandemic, in 2019, there were 87.3 million day visits, just under 10.7 million overnight domestic trips, and a little over 1 million international trips to Wales. Tourism is important to Wales. Provisional figures for 2019 show tourism generated a Gross Value Added (GVA) of £3.4 billion, contributing 5% GVA to the Welsh economy.

The proposed tourism levy is a hot topic within the sector. Tourist levies are common in many tourist destinations across the world. They’re used to finance the maintenance and upkeep of tourist facilities as well as caring for the environments that tourists visit.

The Welsh Government’s Programme for Government and the Cooperation Agreement both pledge to introduce legislation to allow local authorities to charge a tourism levy.

This article explains what the tourism levy is, the wider context of tourism levies globally and in the UK, and the arguments being made for and against introducing a levy in Wales.

What’s the Local Tourism Levy and why’s it being proposed?

The Local Tourism Levy would be applied to overnight stays in Wales. The decision to charge a levy would be left to individual local authorities, and the money raised would be invested into the local authority area.

The Minister for Finance and Local Government, Rebecca Evans, says the levy is an opportunity for local authorities to “manage and invest in the services and infrastructure which make tourism a success”, whether this be cleaning beaches or maintaining toilets and footpaths.

The levy is being proposed to support the future of tourist locations by promoting a more sustainable approach to tourism. The exact fee visitors will be charged hasn’t been decided yet.

What’s the international context of tourist levies?

Tourist levies are used in many places across the world. In Europe, tourist levies, or occupancy taxes, are charged on short-term stays, usually applying to each person (with exemptions for children) per night.

They’re as low as €0.10 in Bulgaria and as high as €7.50 in Belgium. Levies can also vary by accommodation type. In Paris, for example, levies range from €0.20 for campsites to €3.00 for five star hotels, plus additional departmental and regional taxes paid on all types of accommodation. This compares to somewhere like Porto where €2 is charged per person per night regardless of where you’re staying. In some places, such as Berlin (5%) and Vienna (3.2%), levies are charged as a percentage of the accommodation cost.

Not all tourist levies are charged on a nightly basis. In Japan, visitors pay a flat-rate of 1,000 Japanese yen (about £6) to cruise or airline operators when they leave the country. New Zealand’s International Visitor Conservation and Tourism Levy is a single fee of NZ$35 (about £18), which is paid before visitors enter the country.

What about tourist levies in the United Kingdom?

The prospect of a tourism levy isn’t ground-breaking within the UK, having been discussed in the UK Government’s 2007 Lyons Inquiry into Local Government. While an overall levy for England wasn’t supported, a suggestion was made to the UK Government to consider the costs and benefits of allowing local authorities to raise a tourism tax. The then Labour UK Government and opposition parties were in agreement about not pursuing the recommendations.

Local tourism levies have subsequently been considered for a number of places in the UK, including London, Liverpool, Cornwall, and Bath, but none have followed through with these proposals.

In 2019, the Scottish Government consulted on the principles of a “transient visitor levy” in response to tourism pressure in certain areas in Scotland. The proposal was put on hold in March 2020 and plans haven’t yet resumed.

Regarded as a UK first, a tourism-related charge was implemented at the local level in 2014. The London Borough of Hackney launched a project with a voluntary £1 donation added to stays in certain local hotels, up to a maximum of three nights. Donations form part of the Hackney Community Fund, which has been earmarked to support hospitality training schemes, cultural events, and fund improvements to public spaces in the borough. It’s unclear what the impact of this initiative has been.

What does the Welsh tourism sector think?

The Wales Tourism Alliance (WTA) acknowledges the use of tourism levies in other countries, but emphasises that where levies are implemented, rates of VAT are typically lowered on tourism and hospitality. With the current UK-wide rate of VAT, the WTA suggests introducing a tourism levy would be a form of “double taxation” when compared to other destinations. It’s also concerned the additional cost might discourage visitors on lower incomes from coming to Wales, or travelling within Wales itself.

UK Hospitality Cymru has labelled the tourism levy as “the wrong tax at the wrong time”, given the impacts of the pandemic on the sector. It has also said that increased prices might push customers to competitors, with Llandudno Hospitality Association expressing similar observations about the impact that a levy could have on the competitiveness of Wales with other tourist destinations in the UK.

Anglesey Tourism Alliance recognises tourism levies work in other destinations, but warns against a “knee-jerk reaction” and calls for consultation with the sector and visitors.

Where are we now and what happens next?

The Minister recently approved funding for three research projects to support development of the levy. It’s been reported the research will consider the economic impacts of a tourism levy; the tax systems of other countries where tourism levies are used; and an assessment of the demographics of the accommodation sector in Wales.

The Welsh Government is due to consult on draft legislation for the levy in Autumn 2022.

Article by Isobel Pagendam, Senedd Research, Welsh Parliament