Postcards from Canada: Ontario’s visitor levy and its lessons for English fiscal devolution
What Ontario’s visitor levy shows about local rate-setting, devolution and funding local services in England.
What Ontario’s visitor levy shows about local rate-setting, devolution and funding local services in England.
TheGovernment isconsideringgranting England’s metro mayors the power to implement avisitorlevy.1Respondingto the Government’s consultation, 911 compiled evidence fromaround the worldto understand the scope of such a levy.Ontario, Canadastood out withkeylessons for the implementation of a visitor levy–locally known asthe“municipal accommodation tax” (MAT)–and the devolution agendain England.
TheCity ofToronto,Canada’slargestcity,generatesapproximately £76 millionfroman 8.5 per centvisitorlevy.Thisrepresentsless than one per cent of the city’sapproximatelyoperating budget.
TheTown ofHuntsville– a townof21,000 peoplein the touristy ‘cottage country’ just north of Toronto–generatesapproximatelyfrom a four per cent levy. Thisrepresentsoversix per centof thetown’sapproximatelyoperating budget.
Places likeHuntsville, which have large seasonal visitoreconomies,are morevulnerable to shocks in demand compared tolarge cities.Butthese placeshavemoreto gain from a levyas itprovidesasignificantreturnrelativetotheproperty tax base.
The City of Toronto’s 8.5 percent levy is the highest in the province, andconsiderably higherthan that of the suburbs around Toronto. This rate wasincreased temporarily from 6 per cent,in anticipation ofthis year’s Fifa World Cup.Tothe mayor,the World Cupis both a “revenue generating”for local services.Byraising thelevyanddirecting the difference towards FIFA operations, thecitycanmaximize revenuegeneration from the eventandsecure extra funding to cope withthe pressure on infrastructure.
The visitor levy has enabled Huntsvilletocapture seasonaleconomic activityand reinvest itinto localservices.
Thehasfundedmany local projectsas part of their plan to become the leading resort town in Ontario, including:
With the remaining revenue, thehas investedwidely, including:
Not all places levy thevisitorlevybut those which do applyreasonablerates–Local leaders are reasonable and are likely to follow the herd.
Local leaders are best suited to set visitor levies –Rather than a centrallycapped or definedrate,local leaderscan be trusted withthe flexibility to change rates to capture demand.
Visitor levies are a normalized tool of local finance in rural and urbanareas–Rural places where metropolitan-style government is unlikelystillbenefitfrom wider fiscal devolution.
Investment in the visitoreconomyisinvestmentin the local economy –When local leaders are given authority over revenueuse,thevisitor levy expands the local tax base, providing incentives for growth.
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