Mayors are set to receive authority to implement a new charge on overnight visitors in the form of a tourist tax.
The government announced plans to empower local leaders to levy a “modest charge” on tourists staying in various accommodations such as hotels, bed and breakfasts, guest houses, and holiday rentals. Cities like New York, Paris, and Milan already have similar regulations in place.
This initiative aims to enable mayors to generate revenue for local initiatives like transportation and infrastructure projects. Greater Manchester’s Andy Burnham and London’s Mayor, Sir Sadiq Khan, welcomed the move. However, industry leaders criticized it as a “damaging holiday tax” that would likely be transferred to consumers.
The announcement coincides with Rachel Reeves’ upcoming Budget presentation, where she will address tax and spending plans to address public finance challenges.
According to Local Government Secretary Steve Reed, the move is designed to capitalize on the influx of tourists to England’s cities and regions. It grants mayors the ability to allocate more resources to local priorities, thereby fostering growth and sustained investment in communities.
Regional leaders, including Sir Sadiq, expressed approval of the decision, noting the positive economic impact it would have on London. Andy Burnham emphasized the importance of tourism to Greater Manchester’s economy, highlighting the significant contribution made by visitors annually.
The proposed levy is intended to enhance visitor infrastructure and services, ensuring a positive and memorable experience for all tourists. However, UKHospitality chief Kate Nicholls criticized the government’s reversal, labeling it a burdensome tax that would increase costs for travelers and potentially inflate prices in the hospitality sector.
Nicholls warned that the additional tax could amount to substantial costs for consumers, potentially raising the effective VAT rate to 27% for holidaymakers in the UK, positioning it as one of the highest tax rates in Europe.
The plan is subject to a consultation period running until February 18 to determine specific implementation details.