A visitor levy for Wales

We are working on proposals that will give local authorities powers to introduce a visitor levy. The money raised would support sustainable tourism, helping our communities and preserving the beauty of Wales for future generations.

Introducing a visitor levy is a Welsh Government Programme for Government commitment.

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. The visitor levy would represent a small amount of a visitor’s overall spend. Decisions on the rate of a levy in Wales will need to be approved by the Senedd as part of the legislative process.

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 held from September-December 2022 and included in-person engagement events across Wales and one online.
• In March 2023, the Minister for Finance and Local Government, Rebecca Evans MS announced the intention to move forward with plans to develop visitor levy legislation.
• Draft legislation will be introduced to the Senedd for scrutiny in autumn 2024.

For more information on the indicative timeline in the legislation process, see below.

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 visitors staying overnight in visitor accommodation.

Any final decisions on how the levy will be applied will be taken following extensive scrutiny and a vote in the Senedd.

We believe it is fair and reasonable to ask visitors to make a contribution towards the wider costs of tourism. Our intention is to foster a sense of shared responsibility between residents and visitors, to protect, and invest in, local areas. Where a levy is used in Wales it should encourage a more sustainable approach to tourism.

We know that tourism plays a vital role in supporting local economies. But unbalanced, poorly supported tourism can also put pressure on local communities and undermine the visitor experience.

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.

Each local authority will make its own decisions on how the revenues are spent to develop sustainable tourism in their local areas.

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. Feedback we have received through the consultation and from engagement with key partners will help shape a proposal that works well across Wales. Discussions were 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 will continue to assess the potential economic impacts, as well as the broader environmental, social and cultural impacts. We will produce a regulatory impact assessment which will outline the potential impacts of any proposed legislation. This will accompany the draft bill when it is introduced to the Senedd in autumn 2024.

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.

More than 2,500 respondents completed the survey; 1,005 lived in Wales. The results reflected broad support for the principle of a visitor levy. The research found that respondents to the survey were more positive than negative when introduced to the concept of a visitor levy in a place where they go on holiday or in their area. 45% were positive, and 25% were negative and positivity increased amongst people with lots of tourism in their area.

Those surveyed broadly supported the principle of a visitor levy. A majority (58%) of respondents agree that tourists should contribute towards the costs of maintaining and investing in the destinations they stay in, rising amongst people with lots of tourism in their area – in Wales (66%) and the UK (72%) with 13% disagreeing.

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. 

In Wales, we are designing a levy for local authorities to support sustainable tourism, not to deter visitors.

Visitor levies are used successfully across the world to improve the tourism offer to visitors, 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.

In recent months, more destinations are seeking to introduce a visitor levy. The Visitor Levy (Scotland) Bill was introduced to the Scottish Parliament in May 2023. If passed, the legislation will give local councils the ability to add a tax to overnight visitor accommodation if they wish to do so.

Manchester introduced a City Visitor Charge on 1 April this year for visitors staying overnight in certain accommodation.

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

The consultation explored the proposed design of the visitor levy. In December 2022, we commissioned an independent analysis of responses to the consultation in December 2022. This work was undertaken by Alma Economics.

We also published the outcomes of the independent consumer research undertaken by BVA-Bdrc, which explored views among the public about a visitor levy.

The Welsh Revenue Authority (WRA) has conducted user research on behalf of Welsh Ministers to understand how accommodation providers currently operate and inform how a visitor levy would work in practice. Workshops have been held with a number of accommodation providers across Wales.

We will continue to engage with our key partners to understand differing views and inform the design of a levy that will work for everyone in Wales.

As we progress legislative proposals, we will assess the potential economic impacts, as well broader environmental, social and cultural impacts, of implementing a visitor levy in Wales.

We aim to keep the design and implementation of the levy simple and clear, to minimise the administrative burden placed on accommodation providers and local authorities.

A draft bill will be introduced into the Senedd by the end of 2024. The Senedd will scrutinise the draft bill, and may propose amending it as part of their review, before deciding whether or not to endorse it by means of a vote. This will take due time, we  estimate that this decision will be made in 2025.

If the Senedd approves the legislation, it will then be for each local authority to decide if it wishes to start the process to introduce a levy in their area.

A local authority would need to consult with its communities, and undertake its own impact assessments, to inform its decision about implementing a levy.

Once a local authority makes a decision to introduce a levy, there will be a notice period to ensure businesses and visitors are prepared.

Through the above process, we estimate that the earliest a visitor levy will be in place in any part of Wales is 2027.

The visitor levy will put power into the hands of local communities and give them a tool to encourage sustainable, regenerative tourism.