Tuesday, 14 February 2012

Wales can't afford to tax tourism

Following Silk Commission submissions last week, for those who are thinking of introducing a tourism tax, they might like to know that a recent proposal from a local authority to introduce a tourism ‘bed tax’ on overnight visitors in the city of York has been written off by the city’s tourism operators as discriminatory and damaging.
Apart from the damaging effect a tourism tax would have in these straitened times, in practical terms, it would be extremely difficult to enforce and collect. Those of us concerned with tourism will remember that the idea of a bed tax was suggested in the Lyons Report on Local Authority funding in 2006, but was instantly dismissed by the then Labour government. It is extremely surprising to discover that this idea has been resurrected and put before the Silk Commission as part of submissions received on ways to levy new taxes in Wales.
Currently, the British hotel industry already has to carry a 20 per cent VAT burden which overall, results in UK tourism being uncompetitive.
The fact is that all but three other EU member states have a reduced rate of VAT on hotel accommodation and many have also accorded a reduced rate on attractions and restaurant meals. Most hoteliers would agree that the current high rate of VAT makes the UK uncompetitive and that a ‘bed’ or tourism tax would only exacerbate that position.
At a time when we need to be supporting many SMEs, the fact is that coupled with extortionately high business rates already experienced by many operators, a tourism tax would encourage many small operators to close their doors altogether, particularly in Wales where we depend on the industry more than any of the other UK nations.
Deloitte’s Economic Case for the Visitor Economy (Final Report) illustrates the importance of tourism to Wales compared to other parts of the UK:
Total contribution to the Visitor economy in Wales in 2009 = £ 6.2 bn of GDP (13.3 % of the total economy)
This compares to 8.6 % in England and 10.4 % in Scotland which has a much stronger marketing brand than Wales.
The tourism industry in Wales employs 13% of the workforce compared to 8.3% in England and a quarter of all VAT registered businesses in Wales are in the visitor economy.
Tourism is essentially a labour intensive industry and creates jobs as well as supporting local and rural economies.
The fact is that in Wales, as an economic driver, as an employer and in its role as the guardian of both community facilities and opportunities, the tourism industry is of paramount importance and is irreplaceable. We can’t afford to tax it.

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