Welsh Government sets out council tax and visitor levy plans

Annual report

The annual report is the second of this Senedd term, and is structured around the Welsh Government’s ten well-being objectives, which include building “an economy based on the principles of fair work, sustainability and the industries and services of the future”, and building “a stronger, greener economy as we make maximum progress towards decarbonisation”.

To fulfil the objective of making Welsh cities, towns and villages better places to live and work, the Welsh Government has provided councils the power to charge up to 300 per cent council tax on secondary homes and long-term empty properties. Additionally, there have been changes to the rules on non-domestic rates for short-term holiday lets. According to the new regulations, a holiday let should be available for rent at least 252 days a year and be “let for at least 182 days in any 12-month period to be listed for non-domestic rates, otherwise it is liable for council tax.”

Under the objective to protect, re-build and develop services for vulnerable people, the report highlights that the Welsh Government launched a Basic Income Pilot for care leavers in 2022. The pilot program had a 92 per cent participation rate among its target group. This scheme aims to assess the impact of a basic income and provide additional support to care leavers, including exempting them from paying council tax.

Regarding the objective to enable the thriving of tourism, sports, and arts industries, the report highlights progress towards the introduction of a discretionary Visitor Levy for Wales. This levy would allow local authorities to reinvest in local areas raise by charging people staying overnight a small fee. The Government published the findings of a consultation in March 2023. These will inform the development of legislative proposals.

In line with the objective to lead the Welsh people in a national civic conversation about their constitutional future and strengthen their international presence, the report suggests that the government has made efforts to reduce wealth inequalities across Wales: “We consulted on a broad – and initial – set of proposals to make council tax fairer and more progressive and published the responses in December. We continue to support around 270,000 people to pay their council tax bills by maintaining entitlements to reductions.”

Local Government Finance Bill

The results of that council tax consultation were reflected in the Welsh Government’s legislative programme for the year ahead, which was announced by Mark Drakeford, the First Minister in Wales, on 27 June. This includes a Local Government Finance Bill to be introduced in the autumn.

This bill will “reform the council tax and non-domestic rates systems so they’re aligned to changes in market conditions and are more responsive to pressures faced by people and organisations”.

According to Wales Online the bill “will aim to bring in a council tax revaluation of all 1.5 million properties in Wales to rebalance the system to reflect property values as the current system is 20 years out of date”. The Welsh Government has said that the new system of bands and tax rates will be more progressive.

Wales Online quotes the First Minister as saying: “Extensive research work and our experience of operating these systems over many years make clear that targeted reforms are very much needed in this area.”

The announcement of the legislative programme also includes a commitment to legislate for a visitor levy (see above) in the year ahead. It is unclear whether this will be in the aforementioned Local Government Finance Bill or in separate legislation.

The programme also includes legislation to expand and diversify the Senedd, to improve bus services and to “eliminate private profit from the care of looked after children”.

Mark Drakeford said “This is an ambitious and radical programme of reform, which will modernise parts of our tax and electoral system, ensure we put the needs of looked-after children ahead of profits, and create a Senedd which reflects the Wales we live in today”.

Tribunals

A consultation has also been published on a ‘new tribunal system for Wales’. The proposal suggests creating a single First-tier Tribunal for Wales divided into chambers, as well as an Appeal Tribunal for Wales. Although tax tribunals are currently not devolved and are not within the scope of this consultation, the White Paper suggests that Welsh tax tribunals may be considered in the future.

Point 73 of the consultation states that “appeals relating to devolved taxes (land transaction tax and landfill disposals tax) are made to and heard by the UK First-tier Tribunal (Tax Chamber) and the UK Upper Tribunal (Tax and Chancery Chamber) before progressing to the relevant Appeal Court. We intend in time to examine transferring these jurisdictions into the First-tier Tribunal for Wales and Appeal Tribunal for Wales, possibly the Taxation Chamber of the First-tier Tribunal for Wales, as part of the establishment of the unified tribunal system in Wales. Cases currently coming before the UK tribunals are limited in number and we therefore propose to consider this issue in due course. Considerations in relation to the route of appeal for any future Welsh taxes will be on a case-by-case basis”.