Visitor tax is a ‘kick in the teeth’ for hospitality

Proposals to introduce visitor levies in England risk undermining tourism, increasing costs for small businesses and discouraging visitors from choosing English destinations, the Federation of Small Businesses (FSB) has warned.

On September 10, the Westminster Government announced that mayors in England will be given the power to introduce an overnight tourist visitor levy as a percentage of the cost of accommodation rather than a flat fee.

Responding to the announcement, Hospitality Ulster’s Colin Neil told LCN “The proposal to introduce visitor levies in England is a worrying move that, if brought to Northern Ireland, would further compound the already significant imbalance in taxation between North and South.

“The wider issue is the competitiveness of our hospitality sector. VAT is already 20% here, compared with 10% or less in many of our European competitors, including Spain, France, Italy and Germany. Add a 5% visitor levy on top and the effective sales tax burden rises to 27%, an unprecedented level in our economy and, frankly, difficult to justify in a global tourism context.

“There is also a serious question around where the money will actually go. If the levy is simply absorbed into general taxation rather than being genuinely reinvested in tourism, hospitality, local infrastructure, and visitor destinations, businesses and visitors will rightly question its purpose.

“Northern Ireland’s hospitality and tourism businesses are facing substantial cost pressures and are already at a disadvantage compared to southern colleagues who benefit from a significantly lower VAT rate. Adding a visitor levy risks increasing the cost of staying here, making us less competitive, and placing yet another burden on businesses that are already operating on tight margins.

“At a time when we should be making Northern Ireland more attractive and competitive as a destination, adding another layer of taxation is the wrong direction of travel.”

Tina McKenzie, National Chair at the Federation of Small Businesses (FSB), said: “Imposing an uncapped visitor levy in England is a kick in the teeth for the hospitality industry, at a time when small businesses firms are dealing with a deluge of cost rises.

“Running costs have already increased for 91 per cent of small hospitality firms over the last year. These businesses employ thousands and are key to keeping their local economies going – yet the levy risks pushing many to the brink. A third of hospitality businesses have already told us that they are likely to downsize, close or sell up in the next year.

“Allowing levies to be brought in as an uncapped percentage rather than flat fee is hugely disappointing and makes it much harder for businesses to calculate and for authorities to administer.

“This is one-sided devolution, where mayors can only put up taxes and never cut them.

“It’s crucial that the smallest accommodation businesses like B&Bs and guesthouses are exempt from the levy. Local authorities must use their powers to protect the smallest of businesses if they choose to raise a levy. The added burden of extra administration, paired with price sensitivities, will be too much for them to bear.

“This change would also have a disproportionate impact on small businesses and self-employed people staying overnight for work purposes. While bigger companies might be able to absorb these costs, for small firms it will just add to already tight margins.

“Funds raised by the levy need to be spent on our high streets, town and village centres, and local infrastructure, as well as mitigating any adverse impact of high tourism. That must be decided locally, and with small tourism and hospitality firms heavily involved in decision making. This will make sure the money is going to the right place, out to day-trip destinations and not just the big cities that may already have well-invested infrastructure.”