Welsh tourism tax makes for a tough break

by Joe Ventre, digital campaign manager


The four nations of the United Kingdom are on course to unlock, but as many of us embark on a return to something more akin to normal life, the tourism industry remains shackled by covid restrictions. With options for travel overseas severely limited for the foreseeable future, many holiday hopefuls have chosen to take on the notorious British weather and take their breaks closer to home. The dark clouds of this pandemic may still hang heavy over the country, but “staycations” have provided a silver lining in the form of a domestic tourism boom. Many struggling British holiday destinations have been given an opportunity to recoup some of their losses and endear themselves anew to holidaymakers.


The seaside towns and rural escapes of Wales are a perfect example. A recent study by gambling.com found that spending in restaurants, cafés, shopping centres, museums and cinemas has soared in certain parts of the country compared to recent years; as Brits forego the Algarve for Anglesey and Benidorm for Barry Island. In Pembrokeshire, spending increased by a staggering 37 per cent! Booms like these act like ripples in a pond - more tourism means more business, more business means more jobs, and more jobs means more investment in our local communities. You’d imagine that the Welsh government would be delighted to see these areas bouncing back so strongly after such a horrendous year, in which 100 million visitor days were lost. What you might not expect, however, is that they are planning to punish this success with a tourism tax.


Talk of a tourism tax has bandied around the corridors of the Senedd for years, but the issue was ignited recently when it was included in Mark Drakeford’s post-election five-year plan. The detail is still murky, but the proposal involves creating powers for each of Wales' 22 councils to decide if they want to introduce the levy, which would then likely be imposed on nights spent in hotels, bed and breakfasts or self-catered holiday lets. Addressing the Senedd, the first minister explained “a tourism tax, properly done, will benefit the industry because what it will allow those local authorities to do is to invest in the things that make those areas attractive to tourists in the first place. At the moment it is those local resident populations who pay for everything.


At face-value, the logic does seem to follow particularly for Wales’ more rural hotspots. After all, tourists drive on the same roads and use the same facilities as rate-paying residents. But let’s consider the practical implications. Taxpayers are right to fear that local authorities would push this levy to the hilt if given the chance, given they see their council tax rates increase year-on-year. In 2021-22, residents across Wales saw an average band D bill increase of 3.8 per cent. So, having raided the pockets of their residents, councils would also turn to tourists to fund their plentiful pay and perks. 


So what? Well, while it’s difficult for residents to escape these levies - tourists can go elsewhere. By adding an arbitrary charge to holidays, councils would make their local hotels, restaurants, pubs and attractions less competitive with the click of a finger, driving tourism away to other, more affordable areas of these Isles and, when the time comes, the even more affordable destinations abroad. Excessive charges could see Wales’ tourism boom grind to a halt, depriving towns of trade and opportunities at the time when they are needed most. The Welsh government should be showing tourists that Wales is not just a holiday destination for covid, but for life.


The concern from the Welsh tourism sector is palpable. “It is counterproductive and will damage our economic performance, brand and prospects.Jim Jones, chief executive of North Wales Tourism, explains. “It will also increase social exclusion, undermine policies to create a healthier and more active Wales, limit opportunities for economic growth in Welsh-speaking heartlands and disproportionately impact those least able to afford to take a holiday.” Jones’ comments draw upon the findings of a Wales Tourism Alliance report from three years earlier; which concluded “most European countries have chosen to significantly reduce the VAT on their tourism industries to encourage growth, employment and revenue. The imposition of higher taxes has been shown to inhibit growth, employment, revenue and holiday-taking.” 


It’s no secret that levying higher taxes inhibits growth, and it’s safe to say that a tourism tax of the kind proposed by the first minister would be no different. In fact, this logic has recently been acknowledged by the Scottish government, which shelved plans for a tourism tax in Edinburgh last September, acknowledging the need to “take account of the changed context the industry is operating in”. With devolution in the spotlight more than ever, the newly-elected Welsh government is clearly keen to flex its muscle and chart its own course, including its limited tax regime. With a universal basic income trial also on the cards, the first minister must not lose sight of his responsibility for economic growth and the responsible use of taxpayers’ money.


Thankfully, there is still time for the tourism tax to be scrapped. Residents of holiday destinations, in Wales and across the UK, deserve top-rate local services but tapping up already-overburdened tourists and sending them packing won’t help.

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