How would London's proposed tourist tax affect travellers?

2017-02-02 12:28 - Selene Brophy
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Cape Town - While British tourists are a hot favourite when it comes to visiting South Africa, local travellers have also been toying with the idea of heading overseas with a more favourable rand exchange rate, thanks to the dollar-mauled pound.

Soon travellers to London could see a 5% increase in their hotel stays with a £1-pound a night tax added to their bill, said to be part of a plan that sees international tourists helping the city to raise some £5-million, as it faces a 20% cut in its operating budget.

SEE: Brexit tourists: SA’s rand ranked 4th in strongest gains against dollar-mauled pound

The move is supported by London Mayor Sadiq Khan, who stated at a press conference that London is the number one destination for tourists in the world and this would go a long way in help the city cover some of its maintenance costs. 

"Hotels do very well out of that. What we're saying is when the tourists come they opt to pay a small levy which will help improve the city."

London welcomed a record 14 million international visits in the first nine months of 2016 putting the city on course for another bumper tourism year, according to International Passenger Survey (IPS) figures released by London Partners.com, which shows that from July to September 2016 there were 5.2 million overseas visits to the city, a decrease of 0.8 percent when compared to the same period in 2015 but the second highest summer period on record.

SEE: Cape Town drops 10 places in Top Global destinations travellers' list

However Ufi Ibrahim, Chief Executive of the British Hospitality Association is but one tourism association that has expressed concern about the tax saying it does not support the view that London is open for business.

”The BHA urges the Mayor to stop the madness of introducing a tourism levy. Gouging tourists does not fit with the idea that London is open for business.  A tourism levy will harm already hard-press London hospitality businesses and discourage guests from staying overnight and reduce the amount they spend in the wider London economy."

Tourists in the UK already pay the most tax in Europe as the World Economic Forum currently ranks the UK 140 out of 141 countries in terms of tourism tax competitiveness, with Ibrahim saying the UK’s rate of Tourism VAT is already twice the European average.

Some European countries such as Paris, Berlin and Barcelona already have local tourism taxes, they are all said to enjoy a lower rate of Tourism VAT so that any negative impact is offset.

South Africa too has been charging a tourism levy since 2012 with a 1% collected on accommodation nationally and administered by TOMSA,

Alan Winde, Minister of Economic Opportunities in the Western Cape says, "Tourism generates in excess of R17 billion each year, and created employment for around 204 000 people in the Western Cape. Last month, we released figures which found that at a range of key attractions across the region, nine of out ten reported record visitor numbers for the 2016 peak season.

"Foreign arrivals grew at 29% year-on-year in December. This growth is being driven by our decision to select tourism as a key focus sector, the efforts of the hospitality industry, and by the significant private sector investment into major infrastructure projects.

SEE: Cape Town’s 29.8% summer visitor spike: 4 upswing factors set to see it continue

"The best way to sustain the tourism sector is to boost the number of arrivals to our region, and we have put an action plan in place, through our Project Khulisa growth strategy, to achieve this objective.

The Western Cape provincial government says there is no way it would consider implementing further taxes of this nature in a Tourist hot spot like Cape Town.  

Added to this, concern has also been raised about what a tax like this would mean for companies like Airbnb which already have a competitive advantage over hotels in the city.   

In the Western Cape, both Airbnb and Airbnb Experiences have taken off swimmingly, and Cape Town currently has the largest number of listings in Africa. 

Unlike in Germany and France, Winde says, the platform will not be crippled in Cape Town. 

SEE: Airbnb France sued, changes coming to Europe's rental platform in 2017

“I do not believe in banning disruption, I believe we need to grow the opportunities for everyone in a sustainable way,” Winde says. He said that if conflict arises, there will be a consultative process wherein all parties will help to ensure that entrepreneurship and initiative is done practices a sustainable manner. 

We must have regulations in place to protect consumers, but we recognise the massive shifts in innovation as an opportunity, and the need to remove or change regulations which no longer work for us. To not reconsider laws in the face of change is the surest way to get left behind. 

The Fourth Industrial Revolution has taken the world by storm says Winde and shutting it down would "only serve to kill jobs".

"Our aim instead is to be a government which embraces innovation and responds appropriately to global trends which encourage opportunities for more jobs, and advancement."


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