VAT News

A discretionary Visitor Levy proposal for Wales


The Welsh Government has launched a consultation to seek views on the introduction of a discretionary visitor levy for local authorities in Wales, designed to generate a new revenue stream for local authorities to use to fund local services in areas where tourism places additional pressure. Interestingly (for us at any rate) the proposed levy has many similarities with VAT.

VAT has long been held up as one of the most efficient methods of raising tax in any jurisdiction so it should come as no surprise that a new levy might take on the look of VAT in some of its operational features. But, while VAT was first introduced as a ‘simple tax’ by the Chancellor of the day, Anthony Barber, it is evident to anyone in business and registered for VAT that it has grown into anything but simple. And that needs to be recognised by the Welsh Government – in principle VAT is straightforward but in practice, its administration has become complicated and often contentious.

Crucially, the intention appears to be for a new levy to be administered by the providers of taxable accommodation in Wales, who would submit returns and pay tax liabilities to the relevant local authority. In an era where tax simplification should be the goal (although HM Government has recently closed down its own Office of Tax Simplification of course) the benefits of raising revenue for a (much needed) cause, will need to be weighed against the compliance burden that would be placed on many of the smaller businesses in Wales who would be required to manage it.

Visitor Levies and similar local taxes have been introduced elsewhere in the world with varying degrees of success. But one particular variance in these taxes which catches our attention is the differing VAT treatment of the levy itself, some being subject to VAT and others being outside the scope of VAT. The relative freedom that the UK has in setting VAT liabilities following Brexit would make this a UK decision now. But, while the design and implementation of a levy would be in the hands of the Welsh Government, its VAT liability would be up to Westminster, and we can’t help feeling that the Welsh tourist industry would see a Welsh levy which also raised money for HM Treasury … unappealing.

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