England’s metro mayors want tourist tax powers. This might sound like a radical idea, but that’s only because the British state is so centralised – every other G7 country already has local tourist tax powers.
Soon most of the rest of the UK will do so too. Scotland and Wales have each legislated to give their local authorities the power to levy tourist taxes on their visitors, but have chosen a very different approach. Our most recent briefing investigates the tourist tax question, but there’s a bigger lesson here. If England is going to follow the rest of the UK and introduce a local tourist tax, which nation should it follow?
Scotland allows councils to set their own percentage rate tourist tax
In 2024, the Scottish Parliament passed a law granting councils the power to set a visitor levy on overnight accommodation, and local authorities are beginning to implement them. From 2026 onwards, Edinburgh and Glasgow will each introduce a 5 per cent tax, while Aberdeen’s will be 7 per cent. Other local authorities including the Highlands and Stirling are currently consulting on their own levy.
Wales only allows councils to charge a nationally flat fee per person
The Welsh approach is different. From 2027, Welsh councils will be able to levy a nationally consistent fee of £1.30 per person for hotel stays, and 75p per adult in hostels and campsites.
The Scottish tourist tax is fairer
There are three reasons why the Scottish tourist tax is a better model for England than the Welsh approach.
First, the Welsh tourist tax’s flat fee design means it is extremely regressive. This in turn means it is difficult for the Welsh approach to raise significant revenues and provide a strong growth incentive. A high fee would not only disproportionately fall on those on lower incomes and consume a larger portion of their budget as a visitor – it would also hit smaller and low cost accommodation providers heavier than premium properties.
By contrast, the Scottish percentage rate approach means the tax bill is closely linked to ability to pay, as a visitor’s bill will vary according to the cost of their accommodation. Not only is this fairer, it means that attracting in more higher income visitors and more luxurious properties can provide substantial revenue for the local authority.
Local autonomy is better than a flat rate
Second, the Welsh flat rate means the tourist tax cannot be adjusted to local markets. Visitors to countries in practice visit a series of discrete local destinations – a holidaymaker who visits Wales will go to Pembrokeshire or the Brecon Beacons, rather than Wales in its totality. This means that the impact of tourism – and potential revenues from a tourism tax – are extremely localised.
As a result, a flat fee may be far too high in a place with very low demand for tourism, while at the same time being far too low to raise the optimal revenue in a visitor hotspot.
By contrast, the Scottish approach of local control over the levy allows councils to adjust their rates to local demand.
A tourist tax is the first step towards real fiscal devolution
The final element is the political consideration – given how difficult introducing a tourist tax will be, what’s the point of introducing one that doesn’t really work?
There has been opposition in Scotland to a tourist tax. But there has also been opposition to Wales’ tourist tax. In light of this, policy in this area should aim to create a tourist tax that maximises the potential return to growth.
England has an incredibly centralised system of governance that makes untangling the local finance system while protecting local public services tricky. That’s why the mayors are calling for tourist tax powers – a relatively small tax that can prove the principle that greater autonomy changes behaviour
There is a literal pay-off angle to this. A tourist tax must raise substantial receipts to be worth the political pain of introducing a new tax.
But there is a symbolic angle too. The political pain means that the metro mayors must have a strong argument for a new tax and use the receipts wisely. If they choose not to introduce a tourist tax at all, that’s fine too. The test is showing good judgement based on local conditions, not maximising receipts.
This is the real prize of a tourist tax. It’s not really about the revenues. It’s about proving English local government can be trusted to control its own taxbase, and undermining the notion that all economic policymaking must be controlled by Whitehall. Tourist taxes are the first step towards fiscal devolution – that’s the real radical idea.