Thirsty to secure tax revenue, countries around the world have jumped into a race to levy a tourist tax. On the 27th, just a day after Tokyo released a plan on the 26th to remove the cap on its lodging tax and introduce a proportional rate, the British government moved to grant local governments the authority to impose a tourist tax.
As revenge travel demand has surged after the pandemic, analysts say governments are using tourists as a means to plug fiscal deficits. These countries are outwardly invoking the justification of resolving "overtourism (excessive tourism)." In reality, critics say it is a silent tax hike and a way for local governments to turn humanity's cultural heritage into a cash cow.
According to the BBC and the British government on the 27th (local time), Steve Reed, the U.K. Minister for Local Government, officially said to mayors in England that "we will grant the authority to impose a tourist tax on users of lodging facilities such as hotels." Reed said, "Local leaders will have the discretion to improve infrastructure and growth," adding, "We will have tourists contribute to the community and return the benefits to residents."
With this measure, local governments across England, including London, can enact a local government ordinance to collect taxes from overnight guests. Until now, some cities, including London, could not introduce a tourist tax without separate legislation. In effect, the central government has unlocked that gate.
Manchester Mayor Andy Burnham said, "Our city gets millions of visitors a year, but the expense was tight even to maintain infrastructure," adding, "The tourist tax will be used for street cleanliness and public transport improvements." Liverpool Mayor Steve Rotheram also welcomed it as "authority we have long requested."
The U.K. tourism industry, however, pushed back strongly, calling it a Damaging holiday tax. Kate Nicholls, chair of UK Hospitality, said, "Introducing a tourist tax will ultimately lead to higher consumer prices and undermine the price competitiveness of the U.K. tourism industry," adding, "It imposes another expense burden on the industry." The association estimated that the additional burden U.K. citizens and foreign travelers would shoulder annually due to the new tourist tax could reach up to £518 million (about 920 billion won). Nicholls said it would "effectively be no different from raising value-added taxes (VAT) to 27%," and expressed concern that the industry would be less competitive than rivals such as Germany (7%).
Japan, Asia's leading tourism powerhouse, is more openly targeting tourists' wallets. According to the Nihon Keizai Shimbun on the 26th, Tokyo is pushing to scrap the current flat-rate lodging tax and introduce a proportional rate. Since 2002, Tokyo has charged 100 yen if the nightly rate is at least 10,000 yen (about 94,000 won) and less than 15,000 yen, and 200 yen if 15,000 yen or more, as a lodging tax. Anything under 10,000 yen was exempt. The calculation was simple and the burden was light.
But as the yen's weakness and a surge in foreign tourists have coincided, cases of top Tokyo hotels easily exceeding 100,000 yen (about 900,000 won) per night have proliferated, leading to the conclusion that the current 200 yen tax has little effect on tax revenue.
The plan Tokyo is considering would uniformly collect 3% of the room rate. The cap would also be removed. If you stay at a top hotel costing 100,000 yen per night, until now you only had to pay 200 yen as a lodging tax, but going forward you would owe 3,000 yen (about 29,000 won) per day in tax. That is a 15-fold jump. Tokyo plans to implement the new system as early as the 2027 fiscal year. It expects to more than double annual tax revenue from the current 6.9 billion yen.
Kyoto, the "ancient capital," has decided to apply an even harsher calculation. According to the Asahi Shimbun, Kyoto City finalized a revision to its local government ordinance to raise the lodging tax cap tenfold from the current 1,000 yen to 10,000 yen (about 94,000 won) starting Mar. 1 next year. This is the highest level ever among Japanese local governments. It will collect 200 yen if the nightly rate is under 20,000 yen, and 1,000 yen if it is 20,000 to 50,000 yen, but will charge 10,000 yen, equivalent to up to 10%, for guests at high-end accommodations costing 100,000 yen or more. Kyoto set a goal to raise annual tax revenue from the current 5.9 billion yen to 12.6 billion yen (about 118 billion won).
This domino effect of tourist taxes is a global trend. According to Euronews, Venice, Italy, has been running a pilot since April this year, charging day-trippers a 5-euro entrance fee. Barcelona, Spain, raised its city-level tourist tax to a maximum of 3.25 euros per night. Bali, Indonesia, also began collecting 150,000 rupiah (about 13,000 won) as an entry tax from foreign tourists this year.
Governments cite the "beneficiary-pays principle" to cover social expenses from a surge in tourists, such as noise, garbage disposal, and damage to cultural assets. A Kyoto City official said in an interview with the Asahi Shimbun that "the aim is to improve tourism quality by investing tax money in easing congestion and upgrading infrastructure," adding it is "an unavoidable step to enable coexistence between tourists and residents."
Experts, however, said that looking beneath the surface, the primary goal is often to secure tax revenue without tax resistance. Tourists have no voting rights in the region. Raising the resident tax costs votes, but raising the tourist tax can actually win favor with residents.
Legal and ethical controversies are hard to avoid. The duty to pay taxes is given in return for protection by the state, and critics ask whether it is reasonable to impose excessive punitive taxation on tourists who stay only briefly. In particular, taxing in proportion to the room rate is effectively a "tax hike on the rich," but the burden ultimately leads to price increases across the travel industry.
Questions about effectiveness also persist. Tourism scholars said raising related taxes does not solve overtourism. When Venice experimented with charging tourists an entrance fee, the number of visitors did not significantly decline. Euronews noted that "demand for popular destinations is inelastic," adding, "even if taxes are raised, visitors will come, bearing the expense." In other words, wealthy tourists who spend 1 million won per night are unlikely to cancel a trip over a 100,000 won tax. In the end, the likely outcome is less control over visitor numbers and only increased local tax revenue.
Experts warned that indiscriminate tourist tax hikes could, in the long run, reduce a destination's appeal and amount to killing the goose that lays the golden eggs. Even if tax revenue increases in the short term, in the long term it could be a bad move that drives travelers away from destinations that have lost price competitiveness. Spain's Valencia region reflected such concerns and scrapped its plan to introduce a tourist tax after a change in control of the city council.
Travel outlet Time Out, citing experts, said, "Since last year, the number of cities introducing or raising tourist taxes has been increasing exponentially," adding, "We are now in an era when travelers must include tax items as an essential part of their budgets, in addition to airfare and lodging."