Discretionary visitor levy for local authorities

Tax purpose and scope

As outlined, the purpose for the visitor levy is to enable a more equitable arrangement between visitors and residents. The levy would provide an additional revenue source for local authorities to re-invest locally into the services and goods which are integral to the visitor experience.

We propose that a discretionary levy on overnight visitors would provide a means to generate revenue for local authorities to invest into local services and infrastructure which is integral to the visitor experience. This would recognise the impact visitors have in some areas of Wales and provide a more equitable basis for the funding of local services and infrastructure between residents and visitors.

We know that some stakeholders are concerned about the impact of day visitors in some parts of Wales. The type of levy proposed in this consultation would apply to overnight visitors staying in commercially let visitor accommodation. However, we are interested in your views about application of a levy to day visitors and/or other activities and how these could be feasibly applied before making any final decisions on this matter.

Tax framework (legislation)

We recognise the need for a consistent method of application of any discretionary visitor levy introduced in Wales. However, we note that there may be clearer rationale for greater local determination in some aspects of the tax framework.

We have outlined the key aspects of the tax framework in this section of the consultation, and these are explored in more detail throughout this consultation. We did not identify rationale through our engagement to date for greater local determination other than relating to variation of the level of the rate charged. We are interested in your views as to whether there should be greater local determination on any other aspect of the levy.

Tax design and liability

As the visitor levy we are proposing would be payable by visitors and is on the basis of overnight stays (as the taxable activity), visitor accommodation providers would be required to charge and collect the levy. This type of levy therefore lends itself to a self-assessed tax model (similar to VAT).

As the visitor accommodation provider is the only one who would know exactly who is staying in the accommodation overnight and in this model would be charging and collecting the levy, we propose they are therefore ultimately responsible (liable) for onward payment (remittance) of the tax to the tax authority.

Visitors in scope

There are public costs associated with hosting visitors regardless of the nature of their visit. We propose that all visitors staying overnight within commercially let visitor accommodation (where not exempted) should be considered within scope of the levy, including those travelling for reasons outside of a holiday.

Exemptions

Welsh Government are of the view that there should be exemptions in circumstances where application of a levy is disproportionate to the context and the nature of an individual’s visit. These types of stays are often not made from choice but necessity and generally the individual has no recourse (or limited recourse) to funds to pay a levy, therefore application of a levy would be disproportionate.

We would like to minimise any exemptions to specific circumstances where application of a levy would be disproportionate. However, we are interested in understanding whether this reasoning would apply to any other type of stay and if we should consider applying exemptions in any other scenario.

As outlined under the tax framework section, we are of the view that there should be consistency in application across local authorities which choose to introduce a visitor levy. Therefore, we propose that any exemptions would be mandatory and set out in legislation. There may be circumstances that we are not aware where it would be justifiable for a local authority to have discretionary exemption powers and are interested in hearing views from respondents on this matter.

Accommodation types in scope

The principle of fairness is important to the operation of a visitor levy. The levy we are proposing would be payable by visitors and collected by visitor accommodation providers. As all visitors (where not exempted) would be subject to the levy, we propose therefore that all visitor accommodation providers would be responsible for charging and collecting the levy regardless of size or scale.

As outlined, our preference is for all visitor accommodation providers to be in scope of the levy. However, we want to explore views about whether there should be any exceptions to this, for example a threshold of letting days for when an accommodation should be considered within scope of the levy or based on a minimum price of accommodation or a room, or profit or turnover of the visitor accommodation provider.

Statutory licensing proposals

We would be interested in your thoughts how a statutory licensing scheme may benefit the operation of a visitor levy. As highlighted, a separate requirement to register for the purposes of tax or no registration would be the alternative options.

Rate type

The advantages and disadvantages of the rate-type options have been summarised in this section of the consultation. There is no clear preferential type of rate that we have identified, and we are interested in your views as to what would work best for Wales.

As outlined under the tax framework section of this consultation, it is preferable for all local authorities to utilise the same type of rate to ensure consistency in the application of a visitor levy. This is an element that we propose would be set out within the tax framework with no option for local determination. We did not identify a rationale for local variation of rate type during our engagement, however, please highlight any reasoning for this in your response if you believe local determination of rate type would be beneficial.

An initial summary of impacts depending on the type of rate opted for has been provided in the previous section. Our partial regulatory impact assessment explores potential impacts from the various design choices in more detail. However, we would be interested in understanding if there are any impacts that we might not have considered or if you have further information to provide regarding potential impacts. For example, impacts regarding: resourcing and staff time, financial costs, other administrative costs, time and costs required to update any digital systems, seasonal price changes, and any other impacts we should consider.

Chargeable rate

We recognise that any rate that is set should be proportionate to avoid any adverse behavioural impacts such as individuals choosing not to visit Wales. Determining what level to set this rate at is important as are the factors which should be considered when making this determination.

Most areas that apply visitor levies opt to vary the charge according to either the type/quality or cost of the accommodation. This ensures a level of proportionality to any rate that is set and promotes a more progressive tax share between visitors, linked to ability to pay.

As a starting point, from the basis of simplicity and consistency for the operation of the levy, we propose that the same rate or rates should be utilised to provide consistency in application across local authority areas opting to implement a levy. We recognise that a rate would be set at a moment in time and within a certain context. Circumstances and economies will vary over time and therefore any rate that is set would require a review point to ensure that it is still appropriate.

We would like to understand your views on what an appropriate cap may be at which point a visitor levy would no longer be charged.

Record keeping and submitting returns

The type of levy we are proposing is based on a self-assessed tax model. This requires businesses to retain certain records to demonstrate the accuracy of any self-assessed tax return. This ensures the integrity of the tax system through enabling the tax authority to verify the accuracy of any payments and seeks to deter anyone from deliberately avoiding or evading their tax obligations.

We recognise that there would be administration costs for visitor accommodation providers to operate a levy, increased costs may result from: staff time to administer additional record keeping, IT system changes, accounting changes or other operating process changes. We recognise that there is an opportunity in the design of the levy to minimise the administrative burden on visitor accommodation providers. We are looking to understand potential costs in more detail to help inform the policy design.

The impact of self-assessed returns would be variable according to existing arrangements, infrastructure, and systems that businesses already have in place in relation to the management of their finances. There is a preference to avoid having an end-of-year crunch point for businesses and the tax authority. More frequent returns also enable more accurate up-to-date data, more time for errors to be resolved, more timely provision of data for administrative purposes. Therefore, more frequent returns are likely to be more beneficial for the administration of the levy for all parties. This would enable greater support to be provided to businesses throughout the year when administering the levy. On the other hand, a more frequent return may be burdensome for some businesses.

Enforcement and compliance

We recognise that most taxpayers seek to meet their obligations and respect the rule of law regarding taxes. However, to ensure the effectiveness of any tax system, there is a requirement for the tax authority to be provided with the powers sufficient to police the system to deter, prevent and identify those who seek to avoid, evade or defraud the public purse. We have outlined the need for investigative and civil penalty powers for the effective enforcement of a visitor levy.

Use of revenues

Revenues raised from a visitor levy are intended to be re-invested locally to support the local visitor economy. We recognise that the optimum way to spend revenue from any visitor levy is variable by local area and spending priorities and demand will vary by location. We are interested in your views about how revenues should be used in your local area to benefit the local visitor economy.

Additionally, we note that ring-fencing (hypothecation) was raised continuously through our engagement. As highlighted, ring-fencing is non-preferable as it can restrict local decision making and ability to set local spend priorities for which locally elected officials are accountable for.

Transparency and engagement

Local authorities are well placed to engage at a more local level when considering the optimum use of revenues from a visitor levy in their area. Existing relationships, partnerships and forums may provide mechanisms for local engagement to take place.

Additionally, local authorities existing reporting arrangements regarding finances provide a mechanism to report on the visitor levy. However, we recognise that as the levy is intended to benefit the visitor economy, that more bespoke reporting and local evaluations would provide enhanced levels of awareness of the benefits of a levy and transparency in its use. We propose that reporting requirements would be standardised across all local authorities and determined via the tax framework (as outlined under the tax framework section). This ensures consistency of approach.

As visitors are unlikely to have paid this type of tax before in the UK, there would be a requirement for readily available information for visitors to understand the purposes, benefits, and use of a locally applied visitor levy.

Implementation timescales

Operational delivery models

We propose that there is an opportunity for partnership working between central and local tax authorities on the delivery of this proposed levy. This could combine the strengths of local and centralised delivery. We are seeking views on how best to deliver the proposed visitor levy and whether there should be a role for a central authority or not.

Welsh Language