Minimal admin and clear communications key to tourist tax plans say experts

Tax experts say clear communications for visitors and residents and simple admin for businesses are key factors in successfully introducing a visitor levy in Wales.

The observations were made by the Chartered Institute of Taxation (CIOT) in its response to the Welsh Government’s consultation on plans to give councils across Wales the powers to introduce a discretionary visitor levy.

The aim is for councils and their local communities to benefit from the money raised by the levy to invest in local services and infrastructure.

The CIOT, the leading professional body in the UK concerned with taxation, also notes challenges the plans could create, such as increased administrative burdens for businesses and concerns about inconsistencies or distortions in applying the levy to overnight visitors, but not to those visiting Wales just for the day.

It observes that costs including those relating to traffic congestion, public transport, parking and rubbish collection apply equally to day and overnight visitors.

The CIOT says the levy should be formal evaluated against the Welsh Government’s core tax principles and stresses the importance of clarity regarding how the money raised is spent.

It also recommends considering an increase in indirect visitor charges such as parking in areas with large numbers of tourists.

Administration

Ritchie Tout, Chair of the CIOT’s Welsh Technical Committee, said: ‘’Minimising the admin burdens for businesses in collecting the levy should be built into the design. Proportionate administration is essential in reducing ongoing costs and burdens on visitors and tourist businesses.

“Approaches might include having one digital return (with a paper option for those who cannot access it) to be used by all local authorities opting to apply the levy, exploring the use of booking platforms to collect the levy at the time of booking and keeping real life practicalities in mind when designing any exemptions from the levy as those who are exempt will need to be identified easily.

“Piloting the levy in one area before moving to full implementation could help to iron out problems early on. Clearly, a pilot may need to be of the process as it could be difficult to persuade a local authority to be the first to start charging and risk putting their local businesses at a competitive disadvantage.

“A national model for the levy that can be adopted by local authorities in Wales, ideally following consultation with their communities, will help to promote consistency, accountability and support.

“Having a common nationwide reporting and payment system will reduce both the cost of implementation and ongoing collection but also means that the IT systems used by businesses do not need to be tailored to accommodate differences between local authorities which could be an important cost for businesses operating multiple sites.

“Additionally, visitors are less likely to trust a levy that varies substantially between different areas in Wales.

“The Welsh Government should make sure they give proper consideration to alternative indirect visitor charges such as charging a higher (seasonal) rate for existing paid-for services, such as parking, entertainment venues or catering in areas with high visitor numbers. It would make sense to evaluate these against the Welsh Government’s objectives for the levy.’’