A visitor levy for Wales

We are working on proposals that will give local authorities powers to introduce a visitor levy. This will generate revenue to support investment in the tourism industry in their areas.

Introducing a visitor levy is a Welsh Government Programme for Government commitment. The work is being carried out in collaboration with Plaid Cymru and is part of the Co-operation Agreement.

The proposals would require new legislation if taken forward. Policy development to legislation and implementation is a process that takes time. Measures are unlikely to come into force for several years, if approved by the Senedd. We are in the early stages of the process and potential options about the rate and level of the levy will be explored in more detail as part of the consultation this autumn.

Each local authority in Wales will have the power to decide if they want to introduce a visitor levy in their area.

Introducing a visitor levy in Wales has been under consideration for many years. The idea was suggested by the people of Wales as a potential area for revenue raising following a public call for ideas in 2017.

Following a debate in the Senedd on 4 July 2017, a Call for Ideas for new taxes was issued by the Finance Minister via a WG press notice.

We received over 35 letters and over 270 comments on social media. A tourism tax was one of the taxes put forward by members of the public for our consideration.

The timeline of events is as follows:

2014

• The Wales Act 2014 gave the then National Assembly for Wales powers to introduce new, devolved taxes in Wales.

2016

• The Bevan Foundation Tax for Good report released in 2016 contains suggestions for 8 new Welsh taxes, one of which was the visitor levy. 

2017

• The Cabinet Secretary for Finance (then Mark Drakeford) led a debate in the Assembly to start a conversation about the opportunities new taxes might provide for Wales.
• He then issued a public call for ideas for potential new taxes for Wales.
• Over 300 responses were submitted from members of the public via letter and on social media.

2018

The Welsh Government engaged with stakeholders through the Ministerial Tax Advisory Group and official-level Tax Forum to gauge the views of representative bodies and experts before a shortlist was drawn up of 4 potential new taxes for Wales and announced in 2018. They were:

• a social care tax
• a vacant land tax
• a disposable plastics tax
• a tourism tax

In its Tax Policy Work-plan, the Welsh Government announced it would consider ways in which local authorities could be given permissive powers to develop and implement a tourism tax.

2020 to present day

• A public call for evidence was due to follow in 2020 but was paused due to the pandemic.
• Work on proposals for a visitor levy restarted in autumn 2021 as a Programme for Government Commitment and subsequently part of the Co-operation Agreement
• The public consultation was launched in September 2022.

We are committed to introducing legislation to enable local authorities to raise a visitor levy.

A visitor levy would follow the Welsh Government’s tax principles:

• to raise revenue to fund public services as fairly as possible
• deliver Welsh Government policy objectives, in particular supporting jobs and growth
• be clear, stable and simple
• be developed through collaboration and involvement
• contribute directly to the Well Being of Future Generations Act goal of creating a more equal Wales

We propose that a visitor levy will be a small additional charge to be levied on stays in visitor accommodation. Any final decisions on how the levy is applied will be taken following full consideration of consultation responses.

A visitor levy is not intended to put people off visiting Wales. Instead, we propose that it would be a small contribution by overnight visitors that will generate additional revenue for local authorities to reinvest in local communities. This would enable them to address some of the costs associated with tourism and encourage a more sustainable approach.

The purpose of the levy is to raise additional revenue for local authorities to reinvest in the public services and infrastructure that make tourism a success. Parts of Wales experience high numbers of seasonal visitors. Visitors make extensive use of public goods and infrastructure such as roads. A visitor levy would help fund localised costs from hosting visitors and enable additional public investment in tourism related infrastructure.

Tourism provides a substantial economic contribution to Wales. Tourism-related expenditure was more than £5 billion in 2019. We want to continue to see a thriving tourism industry in Wales and a strong recovery from the impact of COVID-19.

Use of a visitor levy supports the goal of ‘sustainable tourism’ as defined by the United Nations World Tourism Organisation:

Tourism that takes full account of its current and future economic, social and environmental impacts, addressing the needs of visitors, the industry, the environment and host communities.

Sustainable development on UNWTO

A levy will encourage the preservation and celebration of local communities.

Visitors from within Wales and elsewhere would be making a small contribution to help sustain and improve services. These services are important not only to those visiting, but also residents and businesses alike. We want visitors to know that their contribution will make a difference in supporting the destinations they love and enjoy, caring for and protecting local communities to enable them to continue to thrive.

The critical infrastructure that supports tourism should be supported by all those who rely on it. This includes keeping beaches and pavements clean, as well as maintaining local parks, toilets, and footpaths. Investing and maintaining these enhances the reputation of the destination and supports the visitor economy.

We want to empower local authorities to make their own decisions according to the needs of their communities.

We are fortunate to live in a country that has such a diverse offering for tourists. From the sandy beaches of the Gower Peninsula to misty peaks in Eryri, to vibrant, experience-rich breaks in our cities. We recognise that the size of the visitor economy varies across Wales. Local authorities will be able to choose to raise additional funds through implementing a levy. However, how the levy is applied will be explored in the consultation.

We will explore how revenue would be reinvested in more detail, during the consultation.

Estimates of potential revenue raised by a levy will be provided as part of the impact assessment process.

Extensive engagement is essential when developing a new policy.  We have engaged with a wide range of partners to understand and consider differing perspectives. These views are reflected in the consultation document and impact assessment to support others when providing their responses. Discussions have been held with local authorities, businesses, third-sector representatives, industry bodies, national parks, the Welsh Revenue Authority, online booking platforms and officials in overseas administrations which have well developed visitor levies.

We are in the early stages of determining the design and scope of a visitor levy. We will continue to engage widely to develop proposals on how a levy should operate in Wales over a number of years.

We recognise concerns raised by our partners and industry representatives about the development of a visitor levy. These include the impact the pandemic and the cost-of-living crisis is having on businesses. We are currently at the start of the process. We will take on board all views and evidence as proposals progress to help inform our decisions.

When developing legislation, we need to set out the impact a levy is likely to have – both positive and negative. A partial regulatory impact assessment will be issued alongside the consultation document, setting out the data we have available to us at this stage.

Provided alongside the partial regulatory impact assessment, is a compendium of data sources on visitor and accommodation numbers for different types of establishments (Serviced, Self-Catering, Camping/Caravan, Hostels). These figures provide some useful context in which to start framing insights into potential revenue generation and implementation costs.

We plan to update our impact assessment as more evidence becomes available and proposals progress post consultation.

We are developing a robust evidence base to support the design and implementation of the levy. In May 2022, the Minister for Finance and Local Government approved funding for 3 research projects to support the development of the visitor levy. See here for the specifications.

1. An overview of the tax systems facing the visitor economy in selected countries

In our engagement with the tourism industry, businesses have highlighted concerns about the tax burden facing the industry. In particular, concerns have been raised around VAT. VAT rates are set by the UK government. The UK government set the VAT rate back to 20% for the hospitality sector as of 1st April 2022. This is an uplift from the 12.5% rate that had been in place for the sector since October 2021.

We have commissioned research to understand the different tax systems facing the visitor economy in general, and the accommodation sector in particular, in countries with similar economic and tourism characteristics to Wales. This will help us to understand the relative tax burdens facing the tourism industry in other countries, and how the proposed levy would interact with these.

2. Research on elasticities relevant to a visitor levy in Wales

Engagement has also highlighted concerns about how a levy will impact visitor and supplier behaviour. In response to this, we have commissioned a review of the existing research on this topic. The research is examining the evidence on the responsiveness of visitor demand and suppliers to changes in the price of tourism (‘the price elasticities’) and changes in visitor demand to changes in visitors’ income (‘the income elasticity of demand’).

Preliminary findings will be used to inform our understanding of the potential impact of the levy.

3. Analysis of the demographics of the accommodation sector in Wales

We have also commissioned the Office for National Statistic to produce an analysis of the demography of accommodation sector in Wales. The Welsh Government will use the data to inform understanding of the potential impact of the levy, and to support any evaluation activity taken forward.

4. Consumer research

The research  was designed to obtain the views of Welsh residents and UK domestic holiday consumers on the potential discretionary visitor levy. It has explored opinions on whether visitors should contribute via a levy, are willing to pay a levy and if they would change their behaviour if a levy was introduced.

Visitor levy research: views of consumers and residents

Visitor levies are common across the world and more tourist destinations are introducing them to help fund the public services and infrastructure that are integral to the visitor experience. 

More than 40 countries and holiday destinations around the world have introduced a form of visitor levy, including:

• Croatia
• Amsterdam
• Berlin
• Paris
• Frankfurt
• Bruges
• Quebec
• Barcelona
• Balearic Islands
• New Zealand

Use of a levy in international examples provides funds that support green spaces, clean streets, visitor facilities, local communities, preservation of monuments, and public transport. These are integral elements to a visitor’s experience.

A commonly implemented version of a visitor levy is a levy on overnight stays in tourism accommodation. There is variation in the design, rates, and application of a tourism levy internationally. In international models the levy ranges from £0.50 to £5.00 per night. It is often charged per person, and tends to vary according to the accommodation type or cost.

There is little evidence to suggest they have a negative economic impact where they are proportionate. There is also limited evidence around displacement effects.

Greece operates a country-wide levy. In Italy, it is applied at a city/town municipality level. Catalonia operates a regional-wide levy.

Details of the outcome of the consultation which ended on 13 December 2022 can be found here.