WTA urges its members to respond to the proposed tourism tax on mark Drakesford AM's on-line Poll - Link Below
Attached is a copy of the Office for Tax Simplification’s new report, Value Added Tax: routes to simplification, which has just been published.
The report contains eight main recommendations which are as follows:
Mark Drakesford AM, the Cabinet Secretary for Finance has sent an initial response to Adrian Barsby, Chair of WTA. The return to the WTA appeal against the Tourism Tax can be downloaded here:
A proposed tourism tax would damage the economic performance, brand and prospects for Wales, warns a new report commissioned by the organisation that represents all sectors of tourism industry in Wales.
Wales Tourism Alliance (WTA) is pressing the Welsh Government not to choose a tourism tax from the four new tax raising power proposals it’s considering.
The WTA is so concerned about the proposal that it has asked Annette Pritchard, professor of tourism at Cardiff Metropolitan University, to prepare a report on the subject. (See previous article for report link).
Her report states: “The UK tourism industry has one of the world’s highest tax burdens. Most European countries have significantly reduced 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.
“Tourism outperforms all Welsh Government priority sectors and is the country’s second largest employer. A proposed tourism tax will damage its economic performance, brand and prospects.
“It will also increase social exclusion, undermine policies to create a more healthy and active Wales, limit opportunities for economic growth in Welsh-speaking heartlands and disproportionately impact those least able to afford to take a holiday.”
WTA chair Adrian Barsby has written to Wales’ First Minister Carwyn Jones, warning that tourism businesses had already faced significant business rate increases and a tourism tax would make them uncompetitive in the UK market.
“Prices will rise and Wales will gain the unenviable reputation of being the only country in the UK which charges its visitors to stay,” he said. “This will damage the growth potential of the industry at a time when post-Brexit it may be called upon to play an even greater role in the Welsh economy.”
Mr Barsby said the WTA acknowledged that the industry imposed additional costs on local authorities, but the Welsh Government’s formula for allocating financial support to councils made explicit provision for this.
The WTA is seeking an urgent meeting with the Welsh Local Government Association to discuss ways in which the industry may be able to help.
“We understand the pressures on local authorities at the most popular tourist destinations in Wales,” he added. “However, we believe that visitor management by the industry in collaboration with local authorities, Welsh Government and destination partnerships is the most sustainable way of dealing with such issues rather than a simple sledgehammer to crack a nut device such as a tourism tax.
“I would add that whilst imposing additional costs on local authority services, tourism also helps to sustain a wider range of facilities for residents to enjoy than would be the case without the industry.
“A tax on tourism businesses would damage local economies and affect employment prospects by making us less competitive with destinations in England.”
Mr Barsby has welcomed a pledge by Ken Skates, Cabinet Secretary for the Economy and Transport, to consult fully with the industry on the tourism tax proposal. Mr Skates has been presented a copy of Professor Pritchard’s report to Mr Skates
“This will give the alliance and other organisations an opportunity to elaborate further on how damaging this will be for the industry and the economy of Wales and that consequently it should not proceed,” he concluded.
For more information please contact either Adrian Barsby, Wales Tourism Alliance chairman, on Tel: 01352 741998 or 07921 787668, Paul Loveluck on Tel: 01686 650818 or Duncan Foulkes, public relations adviser, on Tel: 01686 650818.
The Wales Tourism Alliance has asked Professor Annette Pritchard to write a paper regarding Tourism Tax and its potential impact on the industry in Wales. At this stage we understand that the Government is only seeking initial views on new taxation possibilities. The WTA has submitted the report as its initial response to the Government’s proposals; met officials to discuss it and presented a copy to the Cabinet Secretary for the economy.
WTA will be consulting with its members and submitting further evidence in due course. WTA is also seeking meetings with other key organisations. We acknowledge the pressure of visitor management faced by local authorities and wish to explore ways in which the industry can work with local authorities to meet these pressures, but a tax on tourism businesses would damage local economies and affect employment prospects by making us less competitive with destinations in England.
To access and download a copy please
Response to the Proposed Tourism Tax:
In the cut and thrust of your reply to Darren Millar's question on a possible tourism tax, some key points may have been overlooked. I noted that you made the point that many countries applied taxation to tourists. That is certainly the case, but what is important is the totality of the tax burden faced by tourism businesses. In comparison with most European countries which levy reduced rates of VAT on overnight accommodation, our businesses in Wales face the full 20% rate. Moreover many have been faced with significant business rate increases.
A key point too is that a tourism tax which in the UK was unique to Wales would affect our competitive position vis a vis the rest of the UK. You say that such taxes do not affect demand. That is only true if businesses can absorb the taxation without raising prices. Given the small margins in this very competitive industry which prevail in Wales, that will not be the case. Prices will rise and Wales will gain the unenviable reputation of being the only country in the UK which charges its visitors to stay. This will damage the growth potential of the industry at a time when post Brexit it may be called upon to play an even greater role in the Welsh economy.
I do, of course, acknowledge as you pointed out that the industry imposes additional costs on local authorities. Your formula for allocating financial support to local authorities makes explicit provision for such costs. The Wales Tourism Alliance is seeking a meeting with the Welsh Local Government Association to discuss the whole issue including ways in which the industry may be able to help. I would add that while imposing additional costs on local authority services, tourism also helps to sustain a wider range of facilities for residents to enjoy than would be the case without the industry.
Finally, could I welcome the undertaking given by the Cabinet Secretary for the Economy and Transport to consult fully with the industry on the proposal to introduce a Tourism Tax. This will give the Alliance and other organisations an opportunity to elaborate further on how damaging this will be for the industry and the economy of Wales and that consequently it should not proceed.
Chair - Wales Tourism Alliance
A joint industry group has finalised a formal submission for presentation to the Department for Business, Energy and Industrial Strategy (BEIS) on behalf of the Tourism Industry. It is the industry’s bid for a Tourism Sector Deal. The document, as well as making the case for the tourism industry, contains four key asks:
The aim of the bid document, in putting forward these asks, is to:
Now that the document has been finalized, Steve Ridgeway, Visit Britain Chair, will begin negotiations with Government which, it is hoped, will be concluded before the end of the year.
The Regional International Passenger Survey Data from VisitBritain for the April to June 2017 period shows spending in Wales down 23% to £105 million. This compares to the record Q2 in 2016 where spending topped £137 million. While the results are disappointing, they need to be viewed with a degree of caution given that the number of visitors (306,000) received in Wales was on a par with Q2 in 2016, this seems an excessively large dip.
This also compares on at UK level to Q2 visits to the UK increasing 9% to 10.9 million, a new Q2 record and the first ever Q2 to top 10 million. With Q2 spending jumping 12% to £6.5 billion, a new Q2 spending record and as with visits the first Q2 the UK has received more than £6 billon between April and June.
Following the Assembly Debate on the 5th July 2017 which included statements proposing a Tourism Tax this article outlines some of the arguments against the introduction of such a tax. Whilst it appears there is no immediate prospect of a tourist tax in Wales given the complex legislative hurdles that need to be overcome, this provides an early reasoning as to why we see this tax would be a severe blow to our industry and its competitiveness in Wales.
Whilst the WTA is not opposed to fair taxation, the WTA opposes a Tourism Tax on the grounds that they would harm the hospitality and tourism sector and is simply not a fair tax. In brief:
Background: Council funding has decreased significantly since the recession with successive Government’s imposing cuts that amount to 7.5% reduction funding since 2007/8. As tourism development and marketing is a non-statutory function, it is one area that has borne the brunt of these cuts. The combination of the reduction in funding and the increased responsibilities of councils is leading the Welsh and UK Governments to examine mechanisms for tax and spend locally to raise additional revenue. While there is currently no legal mechanism for councils to impose a tourism tax, NDBRs are collected and paid into the Welsh Government's Non-Domestic Rates Pool and directly redistributed to local authorities as part of the local government revenue settlement. This has raised a precedent and opened the door to examining whether the Welsh Government should raise local taxes – one of which could be a tourism tax.
In 2004 and inquiry was undertaken by Sir Michael Lyons which concluded that there was not a strong evidence base to support the introduction of a tourism tax in the UK. The Government agreed that the case for a tourism tax had not been made and ruled out any further work on this issue. The following draws on some of the findings.
The ‘Tourists Don’t Pay their Way’ argument: Tourism Tax Fairness & VAT
One of the main arguments for the introduction of a Tourism or bed tax is the perception that visitors to a destination do not pay their way. The view is that visitors place a burden on public services and amenities paid for by residents without contributing to the maintenance of those services and facilities. The argument runs that, by imposing a tourism tax, usually in the form of bed tax, visitors can pay the additional costs of maintaining the public realm rather than imposing these costs on local residents. However, this is an overly simplistic way of considering both the taxation of visitors and the impact of visitors on destinations.
First, it is erroneous to think that visitors do not pay their “fair share” of taxes. The World Economic Forum, in its 2015 international tourism competitiveness survey, ranks the UK at 140th out of 141 countries in terms of price competitiveness. This ranking is primarily due to the level of tax that visitors pay. Whereas most European countries operate a reduced VAT rate on the main components of visitor expenditure (accommodation, restaurant meals and attractions) the UK charges full rate VAT on all three. In addition, the UK has one of the highest rates of Fuel Duty in the world (which impacts on domestic visitors) and the highest rate of Air Passenger Duty in the world (which impacts on inbound visitors).
The problem is not, therefore, that visitors do not pay their way, but rather that the tax that tourists already pay is collected centrally by Government and not recirculated to the destinations in Wales. This could therefore continue alongside a new tax specifically for destinations. The visitor will in effect pay twice.
The high level of taxation that UK visitors face is one of the primary reasons why the UK runs a considerable tourism deficit as UK residents seek cheaper holidays overseas. In 2008, this deficit reached almost £21bn before reducing to around £14bn due to the recession. Adding an additional Wales tourism tax to the already considerable burden faced by people holidaying in the UK would simply encourage more people to take their holidays outside Wales or overseas, exacerbate the tourism deficit and reduced the contribution of UK visitors to the Exchequer.
Competitive Overall Taxation
Introducing a tourism tax is feasible where the overall level of tax paid by customers remains competitive with other destinations. It is notable that there is only one European country (Slovakia) that charges a tourism tax while not having a reduced rate of VAT for accommodation businesses.
Similarly, in the USA, while some States have higher tourism taxes than others, almost invariably the states with high tourism taxes have low sales taxes, making the overall level of taxation similar.
The second pre-condition for a successful tourism tax is where the funds collected by the tax are hypothecated to tourism development and promotion. There are many examples of destinations where tourism businesses have agreed to a tourism tax as a means for funding tourism development. In these situations, the funding is usually managed jointly by the industry and the local authority and used to fund an agreed strategy for tourism development.
The UK fails both these pre-conditions. First, as shown above, the UK already has the one of the highest levels of tax on visitors of any country in the world. As such, adding a new tourism tax will simply make the UK increasingly uncompetitive as a destination. Second, in the UK, bed tax proposals are generally put forward as a way for local authorities to fund existing costs, rather than as hypothecated funds to boost development and promotion.
Are Tourism or Bed Taxes Fair?
Even if you were to take it as a UK wide Tourism Tax…the 2015 UKTS and Day Visitor Surveys show that there were a total of 1,649m domestic tourism trips undertaken in the UK. Of these, 1,525m (92.5%) were daytrips where the visitor did not stay overnight. Introducing a bed tax would, therefore, be requiring just 7.5% of visitors to a destination to pay for the costs associated with all visitors.
If that was not inequitable enough, it is doubtful that councils would even be able to gain the tax from this 7.5% of visitors. One problem is that a large percentage of visitors to a destination either stay with a friend or family member, or stay in their own accommodation. UKTS figures indicates that, of the 124m domestic overnight trips taken in the UK during 2015, 38% were by people who stayed with friends, relatives or in their own property. So this leaves just 78m of 1,649m trips where councils would be able to charge bed-tax.
However, there is still the problem that, as there is no statutory registration scheme for accommodation providers, there is no mechanism for councils to develop a comprehensive list of accommodation providers in their area. There has traditionally been a problem in being able to identify self-catering accommodation as the properties will not have any signage and the agencies that handle the properties are often located outside council borders. This problem has been greatly exacerbated in recent years by the growth in companies such as Airbnb where residents are able to have visitors so stay in their private home.
Even then, there is the problem of applicability. Would a bed tax apply to someone pitching a tent in a camping ground or a person who takes their mobile caravan to a caravan site?
The easiest way for Councils to avoid the problems of identification and application would be to simply apply a bed tax to serviced accommodation. However, serviced accommodation (e.g., hotels, motels, guesthouses, inns and B&Bs) is only used in 41.7% of the overnight trips taken and only 30.8% of all the nights that people spend away from home.
This means that a bed tax levied on serviced accommodation would only be targeting 3.8% of the people who visit a destination each year. As such, imposing a bed tax is a highly inequitable way of gaining funds from visitors to a destination and deters the very people who contribute the most in terms of expenditure in the local economy.
The Wrong Sort of Incentivisation
It is well known that many day visitors tend to spend relatively little in the destination that they visit. This is highlighted by the 2015 Day Visitor Survey which shows that a day visitor spends just £35 per day with local businesses, much less in Wales. This is almost half of the £66 that the average overnight visitor spends per day, with accommodation providers and restaurants at the destination being the main recipients of this additional expenditure.
Wales Tourism Alliance
(Ref: Sources: ETA, 2017; Findings of the Lyons Inquiry, 2004; WTA Membership)
Welsh naturalist and broadcaster Iolo Williams and Visit Cornwall’s chief executive, Malcolm Bell, will be two of the keynote speakers at the annual Mid Wales Tourism and Business Conference in November.
The conference, themed ‘Marketing the Real Mid Wales: A Shared Vision’, will be held at The Metropole Hotel, Llandrindod Wells on Friday, November 10.
Sponsored by NFU Mutual and organised by MWT Cymru, the independent organisation that represents around 600 tourism and hospitality businesses across Mid Wales, the event will see the launch of a new marketing campaign focused on the ‘Real Mid Wales’.
“Those of us fortunate to live in this beautiful part of the country all have our own ideas about what makes the Real Mid Wales so special,” said MWT Cymru’s chief executive Val Hawkins. “It may be the environment and nature, adventure and sport, health and wellbeing benefits or the various transport routes that appeal to you.
“The challenge for tourism and hospitality businesses is how best to share our enthusiasm to attract visitors. With public sector funding under pressure, is it time for the industry to combine resources and collaborate on a concerted campaign to market the Real Mid Wales to target audiences?
“Our annual conference should help to answer some of these questions and focus all our thoughts on a shared goal: to attract more visitors and investment to Mid Wales.”
Iolo Williams, who lives near Montgomery and has worked in conservation for more than 30 years, will speak about the diverse wildlife of Mid Wales.
Best known for several BBC television series highlighting the wildlife of Wales as well as the popular Springwatch, Autumnwatch and Winterwatch programmes, he loves living and working in Mid Wales and is a great ambassador for the region.
Malcolm Bell is a passionate brand ambassador for destination Cornwall, a spokesperson on tourism issues and sits on European and national advisory boards.
Having overseen the transformation of Visit Cornwall into a Community Interest Company, he is now at the helm of its future as a private enterprise and is responsible for overseeing the vision, strategy and delivery.
The conference will include a question and answer session with panellists Rob Holt, Visit Wales’ deputy director of tourism development and major events, Suzy Davies, AM, chair of National Assembly for Wales’ Cross-party Group on Tourism, Adrian Barsby, Wales Tourism Alliance chair and John Mercer, Wales NFU Cymru director.
Open to businesses of all sizes associated with the tourism and hospitality industry, the conference provides a great platform for networking. Early bird tickets are available from £12 and can be booked online at www.midwalestourismconference.co.uk . For more information, contact MWT Cymru on Tel: 01654 702653.
For more information please contact either Val Hawkins, Mid Wales Tourism chief executive, on 01654 702653 or Duncan Foulkes, public relations consultant, on 01686 650818.
Adrian Greason-Walker. WTA Policy Advocate. Specialises in Tourism and Environmental Management.