Wales tourism tax could axe 700 jobs in holiday sector says Welsh Government report

More than 700 jobs could be lost in the holiday sector in Wales with the introduction of the tourism tax, according to a report for Welsh Government. This week the Government introduced a bill at the Senedd which would allow local authorities to bring in a visitor levy on overnight stays.

Under the plans visitors staying in hotels, B&Bs and holiday cottages would pay £1.25 a night, while a lower rate of 75p would be charged for hostels and campsites. It could be in place in some areas by 2027 and would add £35 on a family of four's week long hotel or cottage holiday in Wales.

The tourism sector fears another tax on top of current rising costs will damage the industry in Wales and make it less competitive against UK rivals as well as foreign destinations. While these levies are now common in many parts of the world the sector points out that nearly all of these places have lower overall tax burdens.

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The Welsh Government said the money raised would help fund services in tourism hotspots - potentially improving facilities and reducing the burden on local taxpayers.

Tourism industries accounted for 11.8% of employment (159,000) in Wales in 2022, and contributed £3.8 billion (5.1% of GVA).

A report has been produced by Calvin Jones of Cardiff Business School and Welsh Government on the potential economic impact of the levy. The report admits its approach is only indicative of likely future behaviours and outcomes as it is not yet known how many councils would introduce the tax and what the exact response of holidaymakers will be.

It assessed the impact on the Welsh visitor economy using optimistic, neutral and pessimistic scenarios - basing it on businesses passing on 100% of the levy cost to visitors.

In its worst case scenario the economic output hit to the sector was measured at -£47.5m (GVA -£26.8) - with 730 jobs lost in the private sector. For the neutral scenario, the reports estimates around 485 full time equivalent workforce jobs would be lost following the introduction of the visitor levy - with the majority in accommodation and food services but also losses in areas like retail and transport. This is based on a modelled forecast of a 1.6% drop in visitor numbers due to the tax and a -£31m(-17.7m GVA) hit to economic output.

The optimistic outlook had job losses at 250, and a -£16.1m impact on output(-£9.1m GVA).

But the report also says that this will be partly offset due to an increase of roles from the spending from the local authorities.

It said: "New public spending would serve to offset – in part – the losses to the tourism economy following reductions in visitor spending. A Levy would effectively comprise a direct, short-term transfer of revenue from the private to the public sector, albeit with the expectation that Levy revenue would benefit Welsh businesses in the longer term as the income was used to support a more resilient, sustainable, and higher value set of visitor activities."

The levy would raise an extra £33m a year for councils, although this is based on the assumption all local authorities would implement the new tax. This could generate a £34.5m economic output and create or secure 340 jobs.

The net economic impact would be around -140 jobs in a neutral scenario and -390 in a 'pessimistic' scenario. Economic output forecasts would vary from +£19.0m(optimistic) +£3.4m(neutral) to -£12.9m (pessimistic)

It would further increase Wales's public sector at the expense of the private sector. In Wales, public sector roles already make up 31% of the workforce in the country, compared to a UK average of 24%.

It would also be reliant on authorities using the money to invest in visitor infrastructure with concerns the additional revenue will be swallowed up into other services in budget stretched local authorities.

The report also added: "If levy costs are borne wholly by the accommodation sector, with the Levy absorbed in existing price structures, net economic losses are larger at around £40m of GVA per annum.

"Net economic changes overall might then range between +£10.8m and -£42m of GVA – but this assumes visitors will desist from coming to Wales following the imposition of the tax, and instead choose from a relatively limited set of near destinations."

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