A visitor levy for Wales

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

The Cabinet Secretary for Finance and Welsh Language, Mark Drakeford MS introduced the Visitor Accommodation (Register and Levy) Etc. (Wales) Bill on 25 November 2024.

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 was introduced to the Senedd for scrutiny in November 2024.

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

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. This could be maintaining paths, cleaning beaches, supporting visitor centres and promoting our Welsh heritage.

We want to make tourism more sustainable in Wales.

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.

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

Extensive engagement is essential when developing a new policy. We have engaged with a wide range of partners such as 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.

One of the Welsh Government’s tax principles is that our taxes should be developed through collaboration and involvement. Through consultation, continued engagement and the discovery work led by the Welsh Revenue Authority, we have received consistent feedback that we need a form of registration in place to support the levy.

This has informed our decision to include a national register of all those providing visitor accommodation in Wales within the visitor levy bill. We have previously consulted on a statutory licensing scheme for visitor accommodation in Wales as a means of helping to establish a level playing field and to ensure visitors have confidence in the high-standards available throughout Wales. The registration scheme proposed in the Visitor Accommodation (Register and Levy) Etc. (Wales) Bill is the first step towards that scheme.

We will be bringing forward further legislation to move us towards a statutory licensing scheme and enable visitor accommodation providers to demonstrate how their accommodation meets certain conditions. With continued engagement, we will further our discussions with accommodation providers and other tourism stakeholders, as we progress with these proposals for the regulation of visitor accommodation.

When developing legislation, we need to set out the impact a levy is likely to have. All impact assessments have been published here and an explanatory memorandum and regulatory impact assessment for the legislation is published on Senedd pages 

Provided alongside impact assessments and other research, 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.

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 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.

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 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 have been used to inform our understanding of the potential impact of the levy.

Analysis of the demographics of the accommodation sector in Wales

We also commissioned the Office for National Statistics 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.

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

Consultation

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.

In 2023, we commissioned Bangor University to review international evidence on the non-economic impacts of a visitor levy. They examined 7 case studies of destinations worldwide that implement visitor levies. The evidence gathered from these case studies was used to inform recommendations for establishing a visitor levy in Wales.

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.

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.

Many destinations are introducing visitor levies to support local infrastructure and tourism initiatives. Manchester implemented a £1 per person per night City Visitor Charge in April 2023, generating £2.8 million in its first year.

The Scottish Parliament has passed the Visitor Levy (Scotland) Act 2024, allowing local authorities to set their own levy rates. Edinburgh plans a 5% levy on rooms starting in 2026, and other UK cities like Bath, Liverpool, Birmingham, and London are considering similar charges.

Nothing is happening overnight. The Bill has been introduced to the Senedd and will now be thoroughly scrutinised by the Senedd; a decision about whether it will become law is expected in 2025.

If the Bill does become law, local authorities will then be able to decide whether they want to introduce a levy in their local areas, after first consulting their local population and businesses. The earliest possible introduction for a visitor levy would be in 2027.

Each authority will determine how to use the revenues raised to support local tourism and will provide annual reports about how this money is spent. We will work with local authorities, businesses and the Welsh Revenue Authority to create clear and simple guidelines for implementing the levy.

The process of registration for all visitor accommodation providers will start in 2026.