London Mayor Backs Plans for a New Tourism Tax

London could impose a tourism tax as part of wide-ranging devolution reforms endorsed by Sadiq Khan, the mayor of London.

Proposals set out by the London Finance Commission would give the UK capital more power over taxes in exchange for lower levels of government contributions.

“Giving London more control would allow us to manage the current economic uncertainty in the aftermath of the EU referendum, giving London the stronger voice it needs so we can protect jobs, growth and prosperity for the future,” said Khan.

While there’re no guarantee that any of the powers will be handed down to London, it shows the current thinking of the mayor and how he would look to raise money if given the opportunity.

The Department for Communities and Local Government has yet to respond to a question about the possibility of further devolution to London.

Tourism in London

With millions of people visiting London each year, even a modest tourist tax would raise serious money. In 2015 London welcomed 31.5 million people from the UK and abroad.

Even though any tax is a long way off, the mayor’s endorsement of such an approach has drawn fierce criticism from tourism and hospitality organisations were quick to condemn the mayor’s plans.

Ufi Ibrahim, CEO of the British Hospitality Association said the idea of a tourism tax was “madness” and said that it would give the likes of Airbnb “an even greater advantage over hotels in the capital as visitors not only do not have to pay VAT on the cost of their stay but also would not have to pay his proposed tourism levy.”

UKinbound’s CEO, Deirdre Wells, called it a “retrograde step” especially in light of Brexit.

“Introducing a bed tax will counteract the Government’s ambition of making us a truly tolerant and global nation,” she said.

The BHA’s dig at Airbnb looks misplaced. Nothing has been said about who would pay the tax and the report also includes evidence from the Visitors’ Art Foundation, which states that “[c]ruise ships, Airbnb and similar websites could also be included within the scope of such a levy.”

Airbnb already collects taxes in a number of cities across the world, although not everyone is interested.

“We have worked with governments around the world to make it easy for Airbnb hosts to pay their fair share of tax. If London and other cities introduce a tourist tax, we will work with officials there to do the same. So far we have remitted more than $175m in hotel and tourist taxes for governments in more than 220 cities and communities around the world,” a spokesperson said.

The industry’s anger could be down to the fact that it already feels incredibly hard done by. As well as the threat of Airbnb, it also claims to be over taxed. A long-running campaign has sought to highlight the UK’s high level of value-added tax (VAT) on things such as hotel accommodation, compared with other countries in Europe.