UK tourist tax confirmed as landmark ruling reveals why Australia cannot follow

A controversial “tourist tax” is set to hit visitors to British towns and cities, with regional mayors gaining powers to levy an estimated $4 per night on overnight stays.

The move, confirmed for the UK Budget, has ignited a fierce debate over increased holiday costs and its potential to deter travellers.

But while the UK grapples with this contentious charge, Australia’s own legal history means a similar, discriminatory tax would face an insurmountable challenge Down Under, fundamentally altering the discussion for our tourism and real estate sectors.

The UK’s proposal, applying equally to domestic and international visitors, could add a significant sum to holiday bills, with a family of four facing an extra $114 (£56) for a week-long stay.

Proponents argue the revenue will fund local reinvestment, while critics warn of a “shocking U-turn” that could cost the public hundreds of millions and damage Britain’s appeal.

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A controversial “tourist tax” on visitors to British towns and cities has been confirmed for the Budget.

According to The Sun, London mayor Sadiq Khan, Liverpool’s Steve Rotherham and Manchester’s Andy Burnham have all backed the tourism levy.

But the Tory mayor of Teesside Ben Houchen vowed to shield visitors to his North East region and blasted the idea.

“This is yet another cash grab that will hammer the fantastic hospitality businesses we have across Teesside, Darlington and Hartlepool,” he told The Sun.

Aussie tourists could be forced to pay an additional $4 a night and regional mayors will be given powers to introduce the levy on overnight stays at hotels, holiday lets and B&Bs.

Hospitality bosses also warn it could cost tourists half a billion pounds more in tax and make Britain unattractive for visitors.

While local tourism taxes aim to provide essential funds for local development and a more sustainable visitor economy, there can be significant commercial drawbacks regarding their potential to deter tourists, increase operational costs for businesses, and hinder the recovery and competitiveness of the hospitality and tourism sectors.

“This is a shocking U-turn that will only make life more expensive for working people,” UK Hospitality’s Kate Nicholls told The Sun.

“It could cost the public up to £518 million in additional tax when they travel in the UK and having knock-on impacts for the wider hospitality sector.”

The ‘Backpacker Tax’ bombshell: A precedent that protects

However, any attempt to replicate such a scheme in Australia would collide with a landmark Federal Court ruling that effectively outlawed taxes discriminating based on nationality.

The infamous “backpacker tax” case, which saw a higher tax rate applied to working holiday-makers than Australian residents, was deemed a “disguised form of discrimination.”

In 2019, The court found it violated non-discrimination clauses in Australia’s double taxation treaties, including one with the UK, which mandate equal tax treatment for citizens of both nations.

This precedent means any new Australian tourist tax that differentiates between local and international visitors, or between nationalities, would almost certainly be struck down.

While the tax already exists in other countries, it would be harder to implement in Australia.

The “backpacker tax” ruling not only established a clear legal barrier but also highlighted the significant reputational damage such discriminatory policies can inflict.

Australia’s image as a welcoming destination was tarnished, a risk any new, similar tax would undoubtedly carry.

Consequently, Australia currently lacks a nationwide tourist tax.

While Victoria has introduced a “Short Stay Levy” on short-term accommodation, it crucially applies to all visitors, including residents, thus avoiding the discriminatory pitfalls.

A tourism tax is already used in cities including New York, Paris and Milan.

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