Warning: Tourism industry under threat from Scottish Government move

Industry figures say a tourist tax will fuel global perceptions that Scotland is one of the most expensive visitor destinations in the world, with UK VAT (valued added tax) the highest in Europe and Air Passenger Duty the steepest in the world.

Proponents of a tourist tax, including City of Edinburgh Council, say monies raised by a transient visitor levy would be used to invest in public services utilised by tourists.

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Calum Ross, owner of the Loch Melfort Hotel near Oban, said he “agrees wholeheartedly” that a tourist tax will threaten vital investment in the hotel industry.

He said: “The bottom line is any perceived increase in price, any perceived increase in cost of a holiday in Scotland will decrease the number of visitors. And less money into the industry simply means that, in the current climate with all the other cost pressures, it will absolutely have an impact on investment. Equally fewer visitor numbers cannot do anything other than have an impact on jobs. It will mean fewer people employed in the industry.”

Russell Imrie, managing director of Queensferry Hotels and the president of Best Western Great Britain, declared that a tourist tax was “absolutely” a threat to investment and said politicians are ignoring the perception it creates internationally about Scotland.

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Mr Imrie said: “The message which keeps getting lost in the whole debate is the level of taxation which we already impose on our customers who visit us in Scotland. We charge out customers 20 per cent VAT within our prices, and there is no other country within Europe which charges more than 10%. So for us to add a tourist tax on top of already 20% tax is just putting us at a very severe price disadvantage to the rest of the destinations which customers could be considering for a holiday.”

Mr Imrie said the UK already 135th out of 136 in a ranking of the most price competitive tourist destinations in the world compiled by the World Economic Forum. And he declared: “When we impose this tourist tax we will end up being in position 136. And that is just not a position which Edinburgh or any local authority in Scotland should aspire to. The negative messages which this sends out round the world about the pricing is not what we should be trying to do when the global economy is fragile and the UK economy is extremely fragile because of Brexit.”

Noting that visitor numbers, hotel occupancy and room rates for Scotland are currently trending downwards, Mr Imrie added: “We’re talking about charging an additional tax rate to our customers when the industry is fragile and on a downward curve.”

The proposal comes as the industry faces pressure from an unprecedented escalation of costs, including huge hikes in business rates, the apprenticeship levy, and the National Minimum Wage, as well surging food and drink imports costs because sterling’s Brexit-induced weakness.

Hoteliers say the increased costs are already making it difficult to invest to maintain and develop properties with the introduction of new services and attractions.

And they argue that adding a tourist tax to the mix will squeeze budgets even further, stating that international competition is so tough that simply passing it on to visitors is not viable.

Stephen Leckie, chief executive of the Crieff Hydro hotels group, said: “Where do you end up when you can’t afford to reinvest?

“That’s a big issue for this industry. The quality has improved [and] we have been making hay while the sun has been shining these last few years while things have been good.

“But if that investment stops all of a sudden, instead of Scotland being the number one place to visit in the world [according to] Conde Nast, world travel organisations and all sorts of magazines, we will lose that top spot because the quality is not there.

“We won’t have the money to reinvest and that is a real live problem.”

And Mr Leckie, whose firm runs seven hotels across Scotland, warned that too many councils will see a tourist tax as an easy way to make money without understanding the risk it poses to the industry.

He added: “It is killing the goose that lays the golden egg. Everybody has to play a role in tourism, everybody.”

The SNP Government has pledged to consult this year on the introduction of a “locally determined tourist tax” before bringing forward legislation to allow councils to introduce a transient visitor levy.

It gave the commitment following the horse-trading with the Scottish Green Party to ensure its Budget was passed in Parliament in December.

However, hoteliers say minsters have performed an abrupt U-turn on the issue, noting that the Scottish Government

had previously signalled it had no plans to legislate for a tourist tax in a series of round-table discussions it held with the industry around Scotland in the autumn.

Mr Imrie said: “It’s an outrageous position. Without fail, at all those meetings, the consensus was that this was not something which should be progressed.

“The tourist industry feel extremely aggrieved, let down, and it is just another example of the government not treating the industry seriously.”

Asked if he feels the Scottish tourism industry is taken for granted, Mr Imrie replied: “Absolutely.

“The Scottish Government and local authorities, especially Edinburgh, see the tourism industry as a dripping roast.

“They see the industry, in their minds, making excessive profits, and can afford to charge their customers more.

“They completely ignore the taxation which is already paid by customers and the jobs the industry creates… and the contribution the businesses already make to city finances through the highest rates payable in Europe, just about, for businesses.”

Meanwhile, Mr Ross said there are many questions surrounding how a tourist tax would be implemented, including who will have the responsibility for collecting it, and whether it would be subjected to VAT.