In Brief: A new U.K. government bill would allow city mayors to impose uncapped tourist taxes, potentially increasing costs for hotels and accommodation providers in affected regions.
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Allen Simpson, Chief Executive of UKHospitality – Image Credit UKHospitality
UKHospitality said a government bill would allow mayors and strategic authorities to introduce uncapped holiday taxes without a legal requirement to use the revenue for hospitality, tourism or the visitor economy.
UKHospitality said the tax could increase holiday costs for families and affect people requiring overnight accommodation while away from home for work, visiting children at college or university, or visiting sick relatives.
Oxford Economics’ analysis of a 5% holiday tax estimated that the levy would cost 33,000 jobs, increase taxes paid by holidaymakers by £1.6 billion and reduce Treasury tax receipts by almost £700 million.
Assuming the impact of a 5% levy is fully realized by 2030, the analysis projected a £2.2 billion reduction in GDP, a £101 million loss in direct investment by hospitality and tourism businesses, a £1.8 billion reduction in tourism spending, and 11.9 million fewer nights spent in accommodation.
UKHospitality said the United Kingdom’s 20% VAT rate is the third highest in Europe and that a holiday tax would add to holiday costs.
Polling of 10,005 adults across Great Britain was conducted for UKHospitality in partnership with Butlin’s, Haven and Hilton, by Stack Datra Strategy. The polling found that 56% of respondents opposed the proposed holiday tax, while 24% supported it.
The polling also found that voters were nearly 10 times more likely to punish an MP who backs the holiday tax than to support that MP at the ballot box. UKHospitality said this could affect the government’s majority in 200 seats.
MRP modeling associated with the polling found that a majority opposed the tax in 574 of 632 Great Britain constituencies.
One in five respondents said that any increase in the cost of a break resulting from the holiday tax would prevent them from booking a holiday in England.