Treasury Considers Imposing 'Hotel Tax' on Britons and Overseas Visitors

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Treasury Considers Imposing 'Hotel Tax' on Britons and Overseas Visitors

The Treasury is considering the implementation of a 'hotel tax' that would apply to overnight stays made by both Britons and overseas visitors. This proposed tax, part of officials' "modelling exercises," is being investigated as a means to bolster public finances given the increasing borrowing costs faced by the government. Chancellor Rachel Reeves, who has already introduced £40 billion in tax increases, may need to find new revenue streams as bond prices fall and government borrowing rates reach their highest levels since 2008.

The prospective nationwide scheme would add an extra charge to nightly stays, with comparisons drawn to existing tourist taxes in countries like France. While some parts of the UK are already exploring local tourism levies, including Wales proposing a £1.25 nightly fee for visitors and Edinburgh planning a 5 per cent tax on accommodation, the potential for a nationwide hotel tax could prove to be a significant revenue source. Hoteliers, however, are warning of negative repercussions, with Sir Rocco Forte labeling the proposed measure as a "pernicious new tax" that could have widespread impacts on tourism-related businesses.

Despite growing concerns and criticism from industry figures like Sir Rocco Forte, the Treasury has remained silent on the deliberations surrounding a potential hotel tax, dismissing such discussions as mere speculation. While the chancellor's focus on fiscal rules and spending restraint remains steadfast, market conditions, including elevated borrowing costs, might prompt the need for more substantial measures. The upcoming spring statement on 26 March could potentially unveil emergency budget measures should market sentiments and borrowing costs not improve.