“The Price of a Tourism Boom”: Tourist Taxes Spread Across Major Destinations From the UK to Japan

Surging visitor numbers drive up maintenance costs for cities and tourist destinations
Governments expand accommodation, departure and port levies
Measures aimed at sharing congestion costs and boosting tax revenue

As surging visitor numbers drive up the cost of maintaining cities and tourist destinations, governments worldwide are bringing tourists into the tax base as a new source of revenue. The United Kingdom had been the only Group of Seven (G7) country without a tourist tax in its capital, but the latest measure will empower strategic authorities across England, including London, to introduce visitor levies without a statutory rate cap. Japan has tripled its departure tax, while Greece applies seasonally differentiated levies at high-demand destinations such as Santorini and Mykonos. On the assumption that record tourism demand will remain resilient despite the additional charges, governments are pursuing policies designed both to increase tax receipts and to make visitors bear part of the cost of local infrastructure.

Tourist-Tax Powers Extended Across England

According to the BBC on the 13th local time, the UK Ministry of Housing, Communities and Local Government (MHCLG) and the Treasury have finalized plans to authorize English local authorities to introduce their own “overnight visitor levies” by 2029. The levy would add a fixed percentage to visitors’ accommodation bills and is commonly described as a tourist tax because the burden falls primarily on tourists. The UK government announced its intention to introduce the levy last November, conducted a public consultation through February and unveiled the finalized framework after a seven-month review.

The most notable feature is the absence of a rate cap. The UK government has opted not to impose a separate ceiling, allowing English local authorities to set rates at their own discretion in accordance with local conditions. Under the government’s final proposal, all mayoral and non-mayoral strategic authorities will receive taxing powers. The eligible areas include London, Liverpool, Greater Manchester, the West of England, West Yorkshire, North East England, and York and North Yorkshire. Each authority will determine whether to implement the levy and at what rate after conducting local consultations and completing other required procedures.

London Tourism Demand Underpins Visitor-Levy Plan

This is not the first tourist tax introduced in the United Kingdom. Edinburgh in Scotland used legislative powers granted under devolution to introduce a tourist tax equivalent to 5% of accommodation charges in July. Other Scottish cities, including Glasgow and Aberdeen, are also pursuing their own levies. This is, however, the first time English local authorities will receive the legal authority to introduce tourist taxes of their own.

The UK government has pursued a tourist tax for English regions since late last year. Rachel Reeves, who was Chancellor of the Exchequer at the time, said local authorities would be granted powers to introduce tourist taxes through the English Devolution and Community Empowerment Bill, which is proceeding through Parliament. The Financial Times (FT) described the measure as the first major fiscal-devolution initiative introduced since Andy Burnham became prime minister in July.

The UK government’s enthusiasm for a tourist tax reflects the immense scale of accommodation demand. London alone recorded approximately 89 million visitor nights in 2024. The number of overseas visitors reached 20.94 million, with their spending totaling USD 23.37 billion. Domestic visitors also made 15.1 million overnight trips to London and 189 million day visits.

The Greater London Authority (GLA) projects that the number of overseas visitors will rise to 25.2 million by 2030, with overnight stays increasing to 139 million. The GLA’s tourism-market analysis assigns greater weight to the prospect that demand will continue growing over the medium term. Given the sheer scale of accommodation demand, even a low rate could generate substantial revenue. The BBC estimated that a levy of just USD 1.35 per night in London could raise USD 123.04 million annually. Previous London City Hall reviews also projected potential annual revenue of as much as USD 324.50 million.

Table 1. Status of UK Tourist-Tax Measures and Scale of London’s Tourism Market

Tourist Taxes Become Standard Across Major G7 Cities

London had been the only capital of a G7 member state not to impose a tourist tax. According to research commissioned by the GLA and conducted by the UK think tank Centre for Cities, New York, Toronto, Tokyo, Paris and Milan already operate their own tourist taxes on hotel accommodation and short-term rentals. The UK government’s decision to devolve the relevant powers will now allow London to begin preparing for the belated introduction of its own levy.

New York is a leading example among major G7 cities of incorporating tourists’ accommodation spending into the municipal tax base. According to the New York City Department of Finance, hotel rooms are subject to a hotel room occupancy tax of 5.875% plus as much as USD 2 per room per day. When combined with the 8.875% state and city sales tax collected by the New York State Department of Taxation and Finance and a USD 1.50 daily hotel unit fee, total accommodation-related taxes amount to 14.75% of the room rate plus as much as USD 3.50 per room per day. Centre for Cities calculated that New York City collected USD 671 million in tourist taxes in 2023, equivalent to 0.9% of its total tax revenue at the time.

Japan Raises Departure Tax From USD 6.50 to USD 19.50

Policies that treat tourists as a new source of tax revenue are also being implemented in Japan and major southern European destinations. Effective July 1, the Japanese government tripled its International Tourist Tax from USD 6.50 to USD 19.50. The tax applies to travelers aged two and older who leave Japan by air or sea, including Japanese nationals and foreign residents. Airlines and shipping operators collect the tax as part of outbound fares before remitting the proceeds to the government. The Japan Tourism Agency plans to direct the additional revenue toward automated immigration screening, congestion relief, smart waste bins, cultural-heritage maintenance and the promotion of regional tourist destinations.

Buoyed by a record tourism boom, the Japanese government judged that the higher departure tax would have only a limited impact on inbound demand. According to the Japan National Tourism Organization (JNTO), the number of foreign visitors reached 42.6836 million last year, up 15.8% from the previous year and exceeding 42 million for the first time. Spending by foreign tourists also rose 16% to a record USD 61.75 billion. On the strength of that growth, the government has set a target of attracting 60 million foreign visitors by 2030. Kyoto’s higher accommodation tax and the expansion of dual-pricing schemes at tourist attractions similarly reflect a policy drive to shift more urban-maintenance costs onto the rapidly growing visitor population.

Tourist Taxes Expand Across Europe, Asia and the South Pacific

Greece, which once endured a sovereign default crisis, is also harnessing tourism demand to strengthen public finances and local infrastructure. The Greek government began charging cruise passengers a port-use levy in July last year. During the June-to-September peak season, passengers disembarking in Santorini and Mykonos must pay USD 23.10 per person, while a USD 5.77 levy applies at other ports. The respective rates fall to USD 13.86 and USD 3.46 during the shoulder season and to USD 4.62 and USD 1.15 during the off-season. Greece received 7.93 million cruise passengers in 2024, up 13.2% from the previous year, with Santorini and Mykonos alone attracting 1.34 million and 1.29 million, respectively. The sharp concentration of visitors prompted the government to introduce differentiated taxation by season and location. The proceeds are divided equally among the relevant local authority, the Ministry of Maritime Affairs and the Ministry of Tourism for investment in ports and tourism infrastructure.

The fiscal significance of tourist taxes is particularly pronounced in Greece. The tourism industry generated USD 25.06 billion in revenue in 2024, supporting sovereign-debt reduction and an employment recovery, while the government-debt-to-gross-domestic-product (GDP) ratio fell from more than 180% during the fiscal crisis to 153.6%. The fiscal balance also shifted to a surplus equivalent to 1.3% of GDP that year. At the same time, the concentration of visitors has intensified pressure on water supplies, waste treatment, port traffic and housing costs across the islands, fueling demands that a portion of tourism revenue be reinvested locally.

Tourist taxes introduced in response to overtourism can be found worldwide. Venice, Italy, has charged day visitors an access fee since 2024. During this year’s applicable period, visitors pay USD 5.77 if they book at least four days in advance and USD 11.55 if they book later. Barcelona in Spain and Amsterdam in the Netherlands also collect tourist taxes from overnight visitors, while Bali in Indonesia has charged foreign tourists a USD 8.52 levy since February 2024. New Zealand raised its International Visitor Conservation and Tourism Levy (IVL) from USD 20.37 to USD 58.21 in October 2024, while the Maldives doubled its green tax for resort and hotel guests from USD 6 to USD 12 per person per day in January last year.