Save the great British holiday
Sun lover | 27.10.2006 07:00
We need to encourage people to take theor holidays in the UK and not use aircraft to trsvel overseas.
A new campaign has been launched to stop Gordon Brown's and John Prescott's latest money-making ruse - a new stealth tax on British holidays.
Gordon Brown and John Prescott (prior to losing his job) asked former Labour councillor, Sir Michael Lyons, to produce plans for new local taxes; in December's interim report, he raised the prospect of a new local levy on England's 16,000 hotels, hostels and bed & breakfasts; Wales and Scotland could also be hit.
This would be on top of existing business rates and VAT on hotel bills. Based on similar taxes in other countries, this could potentially add £100 a week to the cost of a family holiday or visit to Britain's tourist destinations. Less well-off families would be the hardest hit.
Hugo Swire MP, Shadow Secretary of State for Culture, Media & Sport, explained, "the brilliant summer weather has shown what a great place Britain is to spend a short break or a holiday. But the great British holiday is under threat from a 'bed & breakfast stealth tax' - Gordon Brown's latest money-making ploy. There's nothing wrong with choosing to travel abroad, but no-one will benefit from making British holidays a rip-off."
Eric Pickles MP, Shadow Minister for Local Government, added, "Gordon Brown and John Prescott have already hiked up council tax bills. Now they want to hike the price of a British break. John Prescott travels the world on foreign jollies at taxpayers' expense, from Sydney casinos, to Maldives scuba-diving to Wild West ranches. Obsessed with the trappings of power, he doesn't give two cents for the struggling British seaside resort."
LABOUR'S BED & BREAKAST TAX PLANS
It noted, "the most frequent proposal was for a local tax on hotel and similar accommodation... I am interested in exploring this issue further" (Lyons Inquiry into Local Government, Consultation Paper and Interim Report, December 2005, p.76-77).
The Government Minister for Tourism, Shaun Woodward, has refused to rule out the new tax, and stated "we have to balance the books" (CatererSearch News, 22 June 2006).
Such a tax could also be introduced in Wales by Gordon Brown. The Scottish Executive is also considering the case for such a tax in Scotland: "A tourist tax has also been seen as a possible supplement to the local taxation system and not a replacement for it. Such a tax might make a contribution in areas where tourism involves costs to the local authority" (Local Government Finance Review Committee, Local taxation in Scotland: Consultation Paper, Section 5).
FIVE REASONS AGAINST THE TAX
Destroying jobs and hurting tourism: The imposition of a new, additional tax on the English tourism industry would damage local economies. A study of tourism taxes across the world has noted, 'whilst it is arguable that demand from business travellers is relatively price inelastic, holiday demand is exceptionally price elastic… If a hotel increases its prices, tourists will simply move to another hotel or if a holiday destination increases its package holiday prices, customers will simply switch to a similar destination elsewhere' (World Tourism Organisation, Tourism taxation: Striking a fair deal, 1998). Reduced tourist spend harms the whole local economy, undermining other local businesses, such as pubs, restaurants, shops and tourist attractions.
Regressive: Less well-off families would be the hardest hit. In the United States, a typical rate for such a hotel tax is 10 per cent of the room rate (LA Times, 'It's taxation without representation for hotel occupants', 22 August 2004). If levied on a hotel charging £70 a night, across a 7 night stay, the tax paid would be £49. For a two room family holiday, this would represent £98 extra per week.
Double taxation: Hotels already pay business rates to pay for local services, and VAT is levied on hotel prices. Tourists also contribute to the wider local economy and tax base via their spending. Singling out a particular business for extra taxation would be unfair. There are not clear 'negative externalities' or external social costs to overnight hotel accommodation that justify an extra tax.
Stealth tax: There is no guarantee that the money collected will be spent on tourist-friendly infrastructure or improvements. Indeed, if HM Revenue & Customs were to oversee the collection of the tax, it is quite likely that Gordon Brown's Treasury will just pocket some or all of the tax – just as it is planning to do with his new proposed land development tax (the so-called 'Planning Gain Supplement').
No effect on council tax: A bed & breakfast tax could not raise enough to cut the level of council tax. The Local Government Association has suggested a tax might raise £500 million across England, but this pales into insignificance compared to the fact that council tax currently raises £19 billion, and government grants to local government represent £62 billion on top. Indeed, if foreign tourists avoid Britain because of higher prices,VAT and business rate revenues may actually fall, offsetting any new revenue from the new tax.
Gordon Brown and John Prescott (prior to losing his job) asked former Labour councillor, Sir Michael Lyons, to produce plans for new local taxes; in December's interim report, he raised the prospect of a new local levy on England's 16,000 hotels, hostels and bed & breakfasts; Wales and Scotland could also be hit.
This would be on top of existing business rates and VAT on hotel bills. Based on similar taxes in other countries, this could potentially add £100 a week to the cost of a family holiday or visit to Britain's tourist destinations. Less well-off families would be the hardest hit.
Hugo Swire MP, Shadow Secretary of State for Culture, Media & Sport, explained, "the brilliant summer weather has shown what a great place Britain is to spend a short break or a holiday. But the great British holiday is under threat from a 'bed & breakfast stealth tax' - Gordon Brown's latest money-making ploy. There's nothing wrong with choosing to travel abroad, but no-one will benefit from making British holidays a rip-off."
Eric Pickles MP, Shadow Minister for Local Government, added, "Gordon Brown and John Prescott have already hiked up council tax bills. Now they want to hike the price of a British break. John Prescott travels the world on foreign jollies at taxpayers' expense, from Sydney casinos, to Maldives scuba-diving to Wild West ranches. Obsessed with the trappings of power, he doesn't give two cents for the struggling British seaside resort."
LABOUR'S BED & BREAKAST TAX PLANS
It noted, "the most frequent proposal was for a local tax on hotel and similar accommodation... I am interested in exploring this issue further" (Lyons Inquiry into Local Government, Consultation Paper and Interim Report, December 2005, p.76-77).
The Government Minister for Tourism, Shaun Woodward, has refused to rule out the new tax, and stated "we have to balance the books" (CatererSearch News, 22 June 2006).
Such a tax could also be introduced in Wales by Gordon Brown. The Scottish Executive is also considering the case for such a tax in Scotland: "A tourist tax has also been seen as a possible supplement to the local taxation system and not a replacement for it. Such a tax might make a contribution in areas where tourism involves costs to the local authority" (Local Government Finance Review Committee, Local taxation in Scotland: Consultation Paper, Section 5).
FIVE REASONS AGAINST THE TAX
Destroying jobs and hurting tourism: The imposition of a new, additional tax on the English tourism industry would damage local economies. A study of tourism taxes across the world has noted, 'whilst it is arguable that demand from business travellers is relatively price inelastic, holiday demand is exceptionally price elastic… If a hotel increases its prices, tourists will simply move to another hotel or if a holiday destination increases its package holiday prices, customers will simply switch to a similar destination elsewhere' (World Tourism Organisation, Tourism taxation: Striking a fair deal, 1998). Reduced tourist spend harms the whole local economy, undermining other local businesses, such as pubs, restaurants, shops and tourist attractions.
Regressive: Less well-off families would be the hardest hit. In the United States, a typical rate for such a hotel tax is 10 per cent of the room rate (LA Times, 'It's taxation without representation for hotel occupants', 22 August 2004). If levied on a hotel charging £70 a night, across a 7 night stay, the tax paid would be £49. For a two room family holiday, this would represent £98 extra per week.
Double taxation: Hotels already pay business rates to pay for local services, and VAT is levied on hotel prices. Tourists also contribute to the wider local economy and tax base via their spending. Singling out a particular business for extra taxation would be unfair. There are not clear 'negative externalities' or external social costs to overnight hotel accommodation that justify an extra tax.
Stealth tax: There is no guarantee that the money collected will be spent on tourist-friendly infrastructure or improvements. Indeed, if HM Revenue & Customs were to oversee the collection of the tax, it is quite likely that Gordon Brown's Treasury will just pocket some or all of the tax – just as it is planning to do with his new proposed land development tax (the so-called 'Planning Gain Supplement').
No effect on council tax: A bed & breakfast tax could not raise enough to cut the level of council tax. The Local Government Association has suggested a tax might raise £500 million across England, but this pales into insignificance compared to the fact that council tax currently raises £19 billion, and government grants to local government represent £62 billion on top. Indeed, if foreign tourists avoid Britain because of higher prices,VAT and business rate revenues may actually fall, offsetting any new revenue from the new tax.
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