First announced in the Autumn Budget, the legislation would give mayors and local authorities powers to apply a levy on overnight accommodation, if they choose to, and retain the proceeds for investment in local communities.
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Ministers said the levy would be charged as a percentage of accommodation costs rather than a flat fee, which they claimed would help protect lower-cost accommodation providers while ensuring visitors contribute towards the upkeep of destinations they use.
Under the proposals, revenue generated by a visitor levy could be spent improving parks, public toilets, destination marketing, cultural attractions and safety measures. The Government has also highlighted commitments from 10 metro mayors to keep any levy at 5% or below.
Uncapped powers
However, the plans have attracted criticism from hospitality leaders, with UKHospitality (UKH) warning they could increase costs for consumers while damaging tourism and hospitality businesses.
The trade body said the Bill would give mayors “uncapped powers” to introduce a holiday tax, with no legal requirement for revenue raised to be reinvested in hospitality, tourism or the visitor economy.
UKH also warned the levy would increase costs not only for holidaymakers, but also for people travelling overnight for work, education or family reasons.
Independent economic analysis by Oxford Economics, cited by UKH, found a 5% holiday tax would cost 33,000 jobs, increase taxation on holidaymakers by £1.6bn and reduce Treasury receipts by almost £700m.
Genuinely shocking
Commenting on the legislation, chief executive Allen Simpson said: “It’s genuinely shocking to see the Government bring forward legislation to hike the cost of a family holiday and risk 33,000 jobs, because that’s exactly what its Holiday Tax Bill will do.
“It is hard-working families that will be forced to pay more for their summer break to prop up local Government finances. It is people in coastal and rural communities that rely on hospitality and tourism who will lose their jobs.
“It is not normal to have this level of taxation on a holiday. The UK’s 20% VAT is already the third highest in Europe, and this holiday tax will make it even worse.”
This comes after three Welsh councils abandoned plans for a visitor levy following opposition from hospitality and tourism businesses, which raised concerns additional accommodation taxes risked reducing demand for domestic tourism and adding further pressure to venues already facing rising employment and operating costs.
