Tourism tax a 'social experiment that none of us want to be part of', says business leader
Corin Crane, chief executive of Coventry and Warwickshire Chamber of Commerce, warned that giving elected mayors the power to raise more funding for their areas means “the two-tier system is real now”
Businesses across England could be forced to operate in a “two-tier” system under plans to let regional leaders introduce a tax on overnight stays, a chamber of commerce has warned.
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The Government announced on September 10 that elected mayors would be allowed to introduce an Overnight Visitor Levy on hotels and other paid accommodation.
The charge would be calculated as a percentage of the cost of a stay, with money raised retained for investment in local priorities such as public transport, high streets, events and tourism infrastructure.
Local leaders would decide whether to introduce it following consultation, with legislation still required before the scheme can begin.
But Corin Crane, chief executive of Coventry and Warwickshire Chamber of Commerce, warned that giving elected mayors the power to raise more funding for their areas means “the two-tier system is real now”.
Read more: 'A kick in the teeth': Andy Burnham accused of raid on struggling families with new tourist tax
Coventry sits within the West Midlands Combined Authority, but Warwickshire does not, despite the two county and the city sharing a visitor economy and close business links.
Mr Crane told LBC: “We would be in this really mad situation where Coventry is in the West Midlands Combined Authority area, so in effect the Mayor Richard Parker could impose a tourism tax on local businesses, but Warwickshire’s not in that area.
"You have cheaper hotels but no investment in Warwickshire, and higher hotel costs but more investment in Coventry.
"It just feels like a two-tier system, like Coventry and Warwickshire is part of some sort of social experiment that none of us want to be part of.”
Accountancy body ICAEW has also warned of “border effects”, arguing that differences between neighbouring areas could push visitors towards hotels outside areas with the levy.
It said a patchwork of local rules could also create additional costs for hotel chains operating in several regions.
The Government says all mayoral and foundation strategic authorities will eventually receive the power, but each will be free to decide whether to use it and how the proceeds should be spent.
Leaders are expected to begin publishing spending plans by early 2028, but England’s Labour mayors have already pledged to cap the tax at 5%.
Ministers argue the levy will allow tourism destinations to reinvest in the services, attractions and infrastructure on which the industry depends.
Similar forms of visitor tax are in place in other countries, while Scotland and Wales have also introduced legislation allowing local levies.