October’s Budget saw some groundbreaking announcements. However, the hospitality sector is focused on another piece of legislation that’s predicted to cause havoc. A plan for a ‘tourism tax’ has sparked a debate amongst holidaymakers and businesses, arguing that the tourism industry is already overburdened and whether or not this could be a solution.
According to the World Travel Market, the tax “could raise hundreds of millions of pounds a year”. However, the hospitality sector believes it would only further strain the industry. We’ve taken a look at all the key points in this discussion that highlight the potential cost to UK businesses.
What is the tourism tax?
Tourism tax is a small charge added onto accommodation fees per guest. It is usually introduced to reduce tourism to a sustainable level, and the income is then spent on conservation projects that protect the local environment and community. Truthfully, it is unlikely to dissuade many holidaymakers but will bring in quick money.
While tourists will probably be pleased to hear that the tax is supporting conservation efforts in the area they are visiting, they may feel somewhat short-changed. By nature, they will contribute to the local economy – by charging more, are you only going to penalise those who can’t afford to travel? Similarly, how transparent will the spending be? Will it be regulated by an impartial entity?
Who is in favour of it?
In a poll of 1,000 UK holidaymakers, 45% believed that the UK should impose its own tax on tourism. Overseas visitors spent 285 million nights in the UK in 2017 according to the Office for National Statistics. With the proposed tax, local councils could receive up to £570m to spend on infrastructure in popular tourist destinations.
Such a proposal currently seems to resonate with the public. The notion that the country does not return the same tax that popular British tourist hotspots do (Spain, France and Italy) is likely to cause frustration – especially considering that the majority of UK museums and galleries offer free entry.
Who will the tourism tax harm?
Leaders in the hospitality sector firmly believe that this will only have a detrimental effect to the industry. Birmingham announced in 2017 that they would be adding a £2 levy on visitors during the 2022 Commonwealth Games. The second city was narrowly followed by Bath and Oxford who revealed they too would implement a tourist tax earlier in 2018.
UKHospitality’s Chief Executive Kate Nicholls expressed concern in a passionate open letter to Philip Hammond. She wrote to convey “profound opposition” to a tourist tax policy and claimed that it would “create bizarre incentives” where tourists would stop staying in one place for a lengthy period of time.
Nicholls continues to suggest that it will push tourists to use home-sharing services like Airbnb which will result in them paying no tourist fees at all. Mike Cherry, Chairman of the Federation of Small Businesses, added that small organisations in the tourism sector are “already up against high business rates” and that it would only restrict owners from growing their firms.
If you would like to discuss any potential implications to your business regarding tourism tax or any other legislation, then please get in touch. We’re more than happy to offer our guidance and present solutions for your current accountancy processes.
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