A think-tank has warned that a flat rate visitor levy in England would place a higher burden on budget travellers and make a new system more complicated.

Ministers are currently considering how to introduce visitor levy powers for metro mayors in England, which short-let owners are expected to have to collect. Centre for Cities says the UK government should learn from the experience in Scotland where the government first enabled councils to charge a flat rate levy as well as the current percentage rate model.

“Whitehall, English metro mayors, and Scottish local authorities should beware the pitfalls of flat rate levies and aim to implement percentage rate levies to maximise growth incentives and fairness for visitors,” says Caitlin Rollison, external affairs and policy manager.

Operate

Places around the world successfully operate percentage rate levies, including major global tourist destinations like Amsterdam, says Rollison.

Centre for Cities believes flat rates are more regressive for visitors as they place a higher burden on budget travellers to raise the same amount of revenue as a percentage levy; flat fees are a much larger share of the cost of accommodation for visitors to the typical hostel than they are for visitors to an expensive hotel.

System

Flat rates also risk making the system more complicated rather than less and lack flexibility to capture more revenue from higher-priced accommodation or during seasonal peaks in demand.

“Percentage rate levies are buoyant – revenues rise as business activity grows, costs on business fall during periods of lower demand, and receipts are not eroded by inflation,” she adds. “In contrast, flat rate levies fail to capture additional revenue from more expensive accommodation options and growth in visitor demand.”

The Chancellor and England’s metro mayors should push for percentage rate levies, says the group. “In the end, English politics may follow Scotland and make a flat rate levy an option for England’s metro mayors. If so, the Chancellor must make sure the mayors still have a percentage rate option available to them.”

A tax of £2 per person could add £112 to the bill for a family of four on a two-week summer holiday, UK Hospitality has previously warned.

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