Britain can’t afford a self-harming tourist tax
Tourism is exactly the kind of industry that the country needs more of, yet it’s about to be taxed like a burden instead, says Anne Strickland
With millions of us packing for summer holidays this month, it is worth remembering that tourism in the United Kingdom is one of the industries that we are still quite good at.
Our appeal lies in our centuries of history, our language that most of the world already speaks and, particularly in London, indoor attractions built to put up with our usual drizzle so they remain enjoyable throughout the seasons. The industry is worth £147bn a year to the British economy and unlike some of the other main drivers of our economy, it looks to be relatively future and AI-proof. The UK is around the seventh or eighth biggest country in the world by tourist arrivals, but third for tourist receipts, a gap driven in large part by London, one of the highest-value markets anywhere.
Tourism is exactly the kind of industry that the country needs more of, yet it’s about to be taxed like a burden instead.
On the back of this year’s King’s Speech, mayors in England are set to gain the power to add an overnight visitor levy on hotels, guesthouses and holiday lets, taxing tourists as if they had nowhere else to go. The usual justification for a tourist tax rests on two claims: that visitors don’t pay their way for the local services they use, and that other destinations already tax tourists without any harm, so Britain would only be catching up.
Take the first claim. Tourists are incredibly unlikely to draw on the NHS, pensions, welfare or social care – by far the largest areas of public spending – while UK tourism already generated £52bn in tax revenue last year alone.
We shouldn’t be turning visitors away
As to the second claim, you cannot simply look at a single tax in isolation. Tourism Alliance research found that, once VAT on overnight stays is factored in, UK accommodation is already taxed more heavily than every comparator destination studied with the exception of Amsterdam. And Amsterdam’s rate exists specifically to curb tourist numbers, not fund growth. But in Britain, our problem is not about managing overtourism. Quite frankly, we cannot afford to turn visitors away. This levy isn’t protecting anything. It’s just another way to squeeze money out of an industry that’s already paying its share and a holiday tax on hard-working Brits.
The fact of the matter is that the frictions and tax pressure on our tourism industry have been rising for years: the loss of tax-free shopping for overseas visitors in 2021, rising air passenger duty, and now a levy stacked on top of all of it. The hospitality industry, already reliant on flexible and seasonal labour, is simultaneously adjusting to the Employment Rights Act. Simply put, if visitors decide the UK is too expensive and holiday elsewhere, this is not an industry with the room to absorb that hit.
Even though the UK is the third-highest country in the world for tourism receipts, our global market share of the tourism industry has been falling for three decades, and on tourism price competitiveness, we rank a worrying 113th out of 119 countries.
The Taxpayers’ Alliance estimates any overnight visitor levy, no matter how “cheap”, could cost the UK tourism industry £6bn and 19.5m domestic overnight visits. Suffocating an industry this valuable would be an act of economic self-harm, supported exclusively by the most blinkered high-tax ideologues. It’s little wonder then that it’s being championed not only by the Mayor of London, but also our likely Prime Minister in waiting.
Anne Strickland is a researcher at the Taxpayers’ Alliance