I don’t read the Daily Mail (my Dad does – I’m knocking it lest I get accused by Professor Matthew Goodwin of being part of the New Elite again), but thanks to the excellent Aveek Bhattacharya of the Social Market Foundation I was made aware of their most recent front page. The Mail has joined forces with British Airways, Harrods, and Sadiq Khan in a very unlikely coalition calling for the government to reinstate VAT free shopping for overseas visitors, dubbing the current situation a ‘Tourist Tax’.
I wrote about this very thing last month. You can read the article to find out why I think it would be a pretty stupid idea. In short, it would be incredibly costly for the government, benefit wealthy tourists and luxury brands at the expense of poor people, and add even more complexity to our already ridiculous VAT system. As an aside, a Conservative MP has joined a campaign by the usually wonderful Dogs Trust to lobby for scrapping VAT on dog food. Tax rates should not be set by lobby groups, no matter how adorable the beneficiaries might be, Big Dog being no exception. If we want to help poor people (dog owners or otherwise) then we need to give them money. We need to increase targeted support by increasing Universal Credit, not mucking about with VAT.
However, what did intrigue me was the phrase ‘Tourist Tax’. An actual tourist tax would be a very good thing and London should implement one. Manchester – which is home to two of my favourite things (The Smiths and Manchester United) – has recently implemented one and it’s time for London to follow suit.
Tourism is obviously a good thing. It supports jobs and brings money into the city. However, there are also downsides. For example, the Central Line becomes a nightmare from Notting Hill Gate onwards and trying to walk down Tottenham Court Road to get to Soho is enough to raise even the most patient person’s blood pressure. More serious than just getting in the way and often being a bit annoying, tourists put pressure on services, make the most of London, and then leave without making much of a financial contribution to the infrastructure which supports the city.
Introducing a modest tax on hotel and Airbnb stays in London would help tackle some of the negative externalities associated with tourism while also boosting revenue for the city as it would potentially bring in hundreds of millions of pounds each year. The money could be spent on pretty much anything, but should probably go towards funding TfL which is in dire need of extra revenue.
Such a move would not only help to improve the tube network, it is also likely to be popular with residents. What is more, opponents might argue that it would decrease tourism but the evidence doesn’t really support this claim. Many major European cities have had similar taxes for years or are in the process of introducing one so London looks set to be an international outlier if it doesn’t implement a tourist tax.
A tourist tax would be relatively easy to implement and there are lots of examples from around the world as to what it could look like. For example, it could be a flat rate per person per night, a flat rate based on the rating of the hotel, or a percentage of room rate per night. Alternatively, London could do something completely different if it wanted.
London should be more like Manchester and introduce a tourist tax. It would be easy to do, wouldn’t deter tourists, and would go towards improving the tube network.