Analysis: The most important decisions to be taken around a tax on tourists will involve its design and operational features
Many cities and municipalities worldwide impose a levy or tax on visitors staying in overnight accommodation. There is currently no such levy in Ireland, though this may soon change, judging by recent deliberations in local city council chambers and recommendations in several commissioned reports for Government.
If a visitor levy is introduced, one of the most important decisions taken will be the design and operational features. As with most taxes, the usual design features relate to the tier of government, base and liability, coverage and exemptions, rate, administration and collection, compliance and enforcement, and the use of proceeds.
Who oversees the tax?
Although it can be imposed by central, regional or local government, it is usually legislated for by central government. In turn, central government grants taxing powers to local authorities if they wish to opt in to a visitor levy scheme. This allows for a national framework with local discretion.
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Who is liable to pay it and not pay it?
As the base is usually the purchase of accommodation by visitors (both domestic and international) staying overnight for leisure or business (or both), this rules out day trips, cruise passengers and visiting friends and relatives (VFR). If so, the liability or 'liable person' in law is the accommodation provider.
The coverage or scope can be defined but usually includes some or all of the following - hotels; hostels; guesthouses; B&Bs; camping and glamping sites; caravan parks; short-term lets; and student accommodation when not being used as a primary residence.
As for exemptions, the legislation can define what accommodation types do not fall within the scope of the Act and therefore are not liable, the statutory or national exemptions, and exemptions allowed for by respective local authorities. Exemptions can be by accommodation type, occupier, or duration of stay.
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There is wide variation in the exemptions that other jurisdictions allow for, with a list that may include some of the following - those seeking emergency accommodation (e.g. homeless, victims of domestic abuse, those seeking international protection); those in receipt of welfare payments; the disabled; children; pilgrims; the elderly; carers; large-group bookings; local residents; and student accommodation during term.
How much money are we talking about here?
The rate is one of the most important design features of a visitor levy, with numerous options available. Here we simply list the choices to be made.
They are as follows - per night or per stay; per person or per room; fixed (€3 per night, for example) or variable (3% per night, for example) of the accommodation price; vary by accommodation type, rating, season, and location; inclusive or exclusive of other ‘add-on’ services (e.g. food & drink, parking, etc.); inclusive or exclusive of VAT; and a cap on the maximum rate.
If you were to use Failte Ireland's approved and registered accommodation stock and apply a fixed levy of €3 per person per night (with a conservative occupancy rate of 55%), the estimate is close to €140m. This would exclude short-term lets.
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How will the tax be collected?
Taking collection, compliance and enforcement together, the accommodation provider is often responsible for collecting and remitting the levy amount to the local authority (and any related VAT amount to the tax agency), with penalties imposed for failure to comply with regulations, such as failure to register, make returns, or make payments.
In practice, the design features chosen are usually tailored to a country's circumstances and, from a local government perspective, customised to match a council’s local conditions and priorities. This reflects the nature of the visitor levy, namely, it is a local tax.
The revenue from the visitor levy is assigned to local authorities, with all or a portion of the proceeds ringfenced for visitor-related activities and tourist infrastructure. If legislated for, the decisions taken on the design features will determine the make-up of a visitor levy scheme in Ireland.
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From RTÉ Radio 1's Drivetime, should Dublin have a tourist tax?
Tax design is not simply a technocratic exercise as well-designed features (including the name, with visitor levy preferred to tourist tax) can often help make it more acceptable to taxpayers and the electorate.
One such example in the current economic and political environment where the issue of housing dominates, will be the treatment of short-term lets (e.g. properties advertised on Airbnb), both in the legislation and in its enforcement. As we know from the old derelict sites levy and the new derelict property tax, tax administration and enforcement matter.
Central to good tax design and broad taxation policy, a visitor levy is a good example of joined-up government where all levels of government - central and local in the Irish case – work together to design and operate taxes to fund public services that voters demand and expect.
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The views expressed here are those of the author and do not represent or reflect the views of RTÉ
