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Scottish Tourist Tax: Solution or Setback?

5 November 2019

The Scottish Government has opened consultation on its proposed transient visitor levy, or “tourist tax”, until 2 December 2019. Although Scotland has embraced its status as a centre for tourism, this proposed tax may ease concerns over the increasing strain caused by growing visitor numbers.

Background

The Edinburgh Fringe attracts visitors and performers from across the world, and TV show “Outlander” has continued to draw fans to the Highlands. The Scottish tourism sector brings in around £12 billion annually, employing over 200,000 people. Despite this, concerns exist around the negative aspects of the tourist boom which have prompted the Scottish Government to consider a tourist tax.

What are the Proposals?

The consultation anticipates that a tourist tax would not be introduced until 2021 at the earliest, with the onus on accommodation providers to collect it. The option of introducing the tax would be left to local authorities, who would be given discretion as to how they implement it. The Convention of Scottish Local Authorities (COSLA) has suggested that authorities could implement the tax in line with demand, so it might only apply seasonally. Additionally, it is proposed that people such as refugees and homeless people would be entirely exempt.

The consultation sets out several potential methods of implementing the tax:

  • flat rates per person per night;
  • flat rates per room per night;
  • a percentage of the total accommodation charge; and
  • flat rates varying on accommodation quality.

The consultation favours the last two, which are most aligned with progressive taxation principles.

Comment

The announcement of a potential tourist tax has been met with a divisive response. Many Scottish residents are in favour. New platforms (such as Airbnb) have ushered in a rise in short-term lets, particularly in Edinburgh. Locals are unsatisfied with transient neighbours, and there are concerns that demand for properties to accommodate short-term visitors is pushing up prices for permanent residents. A tourist tax would not make Scotland an outlier in the international tourism scene – many destinations, including Berlin, Amsterdam and Athens, are currently taxing tourists. COSLA emphasises its view that the tax would be a burden on visitors and not businesses, creating revenue that will go towards public services to ultimately benefit tourists.

Yet, many businesses in the hotel and leisure sector are understandably apprehensive. The Federation of Small Businesses recently urged The Highland Council not to introduce a tourist tax, saying the FSB was in no doubt that the region’s tourism sector “as a whole” was firmly opposed. The current proposals place the burden of collecting the tax on the hotel operator. Opponents of the tax also point out that visitors to Scotland are already subject to high taxes and air passenger duties, and there are plenty of other promising destinations around the world for tourists to choose from. There is also the question of whether the tax will benefit Scottish tourism at all. Although funds raised are currently earmarked for reinvestment into the tourist sector, there may be no net gain if the tax simply replaces existing spending with current funding being diverted elsewhere.

The consultation is available to read and respond to on The Scottish Government’s website.

Co-authored by Laura Craig.