Editor's Blog

Local government should re-think its tax on hotels

The government’s stance on taxing the hotel industry leaves a lot to be desired, and the latest proposals from Camden Council have potentially given even more reason to deter international visitors. 

Camden Council has proposed charging London tourists a £1-a-night ‘bed tax’ in an attempt to bring in alternative funding. Admittedly, this isn’t quite as bad as other European cities such as Rome or Florence, where the tax is currently €1 per person, per night, per hotel star for a maximum of five nights, meaning a couple could have to pay up to €50 extra for their holiday.

But then again, it makes the proposal even more surprising when you remember that the UK government insists on a tourism VAT of 20%, significantly higher than Italy’s 10%, and one of the most expensive in Europe. If this rate was cut from 20% to 5%, 120,000 jobs would be created and £4bn would be added to the UK economy, according to the Cut Tourism VAT Campaign.

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The proposals come after it was announced that Camden Council could face over £70m worth of government cuts over the next three years, and that the money from ‘bed tax’ would be used to spend on extra cleaning in popular tourist areas.

But why should hoteliers be singled out to foot the bill for this? It’s clear that hoteliers are already paying way more than their European counterparts. With governments unwilling to budge on the 20% tourism VAT, along with business rates, which for hotels are based on turnover and roughly 5%, it’s clear that hotel performance is being held back. Add to that the number of potentially deterred visitors and it’s no surprise that even 60 MPs in 2014 showed their support for the Cut VAT Campaign.

Thankfully hoteliers shouldn’t be too concerned just yet. Local authorities do not currently have the ability to levy taxes on hotel stays without new national legislation or a local voluntarily agreement, and despite Camden Council’s expected campaign in the next few weeks (calling for more local spending powers and seeking to join with other councils to lobby for the right to impose a tourist levy) previous campaigns from other cities have failed. Past attempts in cities such as York, Birmingham, Bristol and Edinburgh have all been unsuccessful.

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