Welsh Government’s tourism tax plans move closer with rates set to rise

Plans to bring in a tourism tax cleared the first hurdle in the Senedd, with the Welsh Government set to raise the rate to £1.30 per night per person.

Senedd members voted in favour of the tourism tax bill following a debate on April 1 during which ministers announced plans to raise the rates to create an exemption for children.

If the bill completes its passage through the Welsh Parliament, £1.30 per person before VAT could be charged on overnight stays in hotels, B&Bs and self-catering accommodation.

A lower rate of 80p would apply to hostels and campsites, with the 22 Welsh councils given powers to decide whether to introduce a local levy from 2027 at the earliest.

An estimated £264m would be raised if all councils chose to introduce the levy in the decade to 2035, against total costs of £313m to £576m, according to an impact assessment.

‘Less than a sausage roll’

Mark Drakeford led the “stage-one” debate on the general principles of the bill, which would also establish a mandatory register of visitor accommodation providers.

Pointing out that visitor levies are common across the world, the finance secretary stressed councils would have an option rather than an obligation to bring in a levy.

The former first minister argued the levy – which he said would cost less than a sausage roll – will be simple, straightforward and fair, with lower rates than in comparable destinations.

On calls for children to be exempt, Prof Drakeford said an amendment would exempt under-18s from the lower band, with the rates each rising by 5p from £1.25 and 75p.

“I must emphasise that any reduction in the broad base of the levy has to be made up by higher charges on those visits that remain in scope,” he said.

He told the Senedd a power for councils to charge a premium on the rates will be retained.

‘Shame on you’

The Conservatives’ Sam Rowlands warned that tourism providers are deeply concerned about the proposed tax, with the sector accounting for around one in eight jobs.

The shadow finance secretary said the Welsh economy can ill afford an annual £47.5m hit, urging ministers to “axe the tax” and opposing the “assault” on the tourism sector.

Mr Rowlands stressed that already under-pressure tourism providers pay into the system through VAT, national insurance, corporation tax and business rates.

While welcoming moves to exempt children from the lower rate, the former council leader raised concerns about education and voluntary organisations being hit by the tax.

His colleague Janet Finch-Saunders described the tax plans as disgusting. “Shame on you,” she said, accusing members on other benches of letting tourism businesses down.

She warned Wales could become a “no-go area” with tourists deterred by the tax, voicing concerns about projected costs of up to £576m over the next decade.

‘Unsustainable’

The tourism tax bill was introduced as part of the Welsh Government’s co-operation agreement with Plaid Cymru between 2021 and 2024.

Luke Fletcher, the party’s shadow economy secretary, said: “The reality is that the current way in which we do tourism isn’t sustainable in the long term.”

Pointing to a tourism tax introduced in Manchester in 2023, he told the Senedd: “Wales isn’t acting in isolation here but is moving in step with places both in and outside of the UK.”

His Plaid Cymru colleague Siân Gwenllian argued raising a small levy would improve the visitor experience and services for people living in an area all year round.

Senedd members voted 40-15 in favour of the bill, with one abstention.

The bill now moves to stage two, detailed amendments in the finance committee, before a further amending stage in the Senedd chamber and a stage-four vote on the final version.