Holiday tax would ‘decimate tourism’ and cost up to 33,000 jobs

Proposals to introduce a tourist levy in England could drag down tourism spending by up to £1.8b over the next five years, according to research by Oxford Economic commissioned by industry body UKHospitality.

The proposals, which would see local councils and mayors charging an added fee of up to 5% of the cost of overnight stays in hotels and holiday lets, would amount to up to £1.6b in added taxes for holidaymakers and 33,000 jobs losses across the hospitality industry by 2030.

According to the research, the maximum levy of 5% would drag down tourism spending by as much as £1.8b and result in 12m fewer nights spent in holiday accommodation.

UKHospitality’s chief executive Allen Simpson said: “The numbers are clear. A holiday tax would hike costs for Brits, make staycations more expensive and decimate tourism.

“There are no winners from a holiday tax. From coastal communities and city centres to local guesthouses, pubs and taxi firms, the impacts are stark and indiscriminate. Taxes up, jobs lost and our high streets hit once again.

“Holidays are for relaxing, not taxing. The government should keep it that way and stop the holiday tax.”

The industry body is encouraging holidaymakers to contact their local MPs about the proposed holiday levy.

Oxford Economics’ Matthew Dass said: “Our modelling shows that introducing a holiday tax would have a clear economic impact.

“Across the wider economy, the policy is likely to have negative consequences. The additional revenue generated by the tax will be outweighed by reduced economic activity, as higher costs dampen tourism demand, ultimately leading to a loss in GDP.

“With England already operating at the upper end of VAT rates, an additional tax would further weaken the country’s competitiveness relative to other destinations and place additional pressure on consumers.”

Over 200 hospitality bosses from firms including IHG, Hilton, Whitbread and Haven signed a letter to chancellor Rachel Reeves in February urging her to scrap the holiday tax.

Speaking to The Caterer last week, UKHospitality chair Kate Nicholls said the escalating conflict in Iran and its knock on effect on international travel costs made the case for axing the holiday tax for England holidaymakers and hospitality businesses even more urgent.

“It is the wrong tax at the wrong time and sends all the wrong signals to hospitality – and the government could help the sector by ruling it out now,” she said.

The Business Travel Association’s commercial director Andrew Clarke said this levy also "disproportionately penalises UK businesses."

"Business travellers often book rooms when room rates are highest, meaning a percentage-based levy hits them harder. Additionally, unlike those travelling for leisure, those travelling for business often have no discretion. They often can’t rearrange to make it a ’day trip’ or stay with friends. This is a mandatory tax on productivity," said Clarke.

"These individuals are already significant contributors to the exchequer through business rates, corporation tax and income tax. If we want to encourage investment and growth, we shouldn’t be creating more barriers for the many thousands of people who need to travel for business.