Now is the wrong time to foist a new tax on Scottish tourism industry

The principle behind the tax is to help councils raise revenue to deal with the impact that a huge influx of people can have on local services, and to invest in areas such as developing the public realm.

There is certainly no doubt that high levels of tourism traffic can place an enormous strain on local communities.

A good example has been the much-documented fall-out from the North Coast 500, which invites tourists to discover some of the most scenic parts of the Highlands by taking a 500-mile road trip through Wester Ross, Sutherland, Caithness, Easter Ross, the Black Isle and Inverness-shire.

The route has proven to be enormously popular but has drawn lots of criticism too, with local communities voicing their concerns over the impact of excessive traffic on small roads, and the mess left behind by less-than-thoughtful visitors.

Highland Council signalled in 2019 that it would support the introduction of a transient visitor levy (TVL), stating at the time that it could generate between £5 million and £10m which could be used for tourism uses. While the Scottish Government’s initial moves to introduce legislation enabling TVLs were put on hold when the pandemic broke out in early 2020, Highland Council remains supportive of introducing the measure over the longer term.

City of Edinburgh Council has voiced its support for a daily surcharge on overnight visitors to the Scottish capital. At the start of this month it approved plans to introduce a £2 per night tax for each person who has an overnight stay in the city, which the council will impose as soon as legislation giving it the power to do so is passed by the Scottish Parliament.

It estimates that between £5m and £35m could be raised as recurring revenue each year from the levy, which could be spent on cleaning public areas, capital infrastructure projects, improving transport and promoting the city as a visitor destination.

Given the huge amount of visitors Edinburgh attracts in normal times each year, most notably during the Festival Fringe in August, it is understandable that the council is seeking to raise revenue to pay for the impact that such an influx can have on infrastructure, and indeed to invest to ensure the city continues to draw people in such vast numbers.

But on the flip side is the impact that such a move could have on struggling tourism businesses.

The mood in the industry is far from buoyant at present.

Having fought so hard to survive the many challenges posed by the pandemic, worries over restrictions on the ability to trade have now been replaced by a cost-of-doing business crisis so severe that it could prove to be even more difficult to endure than Covid.

So ferocious have been the rises in the cost of energy, labour, food and drink, driven partly by the fall-out from Russia’s war in Ukraine, that many hotels have decided to close for the winter, or at least to operate at reduced capacity.

Why would a hotel go the expense of gearing up to open for business – employing staff, stocking up and paying for heat and light – when the inflation crisis means far fewer customers will be expected to come in?

From the perspective of the international tourist, it could be argued that those who can afford to visit Scotland from the likes of the US or China are not going to be deterred by the prospect of paying an extra £2 per night per head. Tourist taxes have long been in operation in other countries and may have been paid by many of us while on holiday without giving it a second thought.

However, tourism chiefs say a tourist tax would hammer home the impression that Scotland is a dear place to visit, precisely when the country should be doing all it can to restore visitor numbers to pre-pandemic levels. They say the rates of value-added tax and air passenger duty are already too high when compared with other nations.

The Scottish Tourism Alliance, moreover, is concerned a tourist tax would impose an additional financial burden on households and businesses when they can least afford it. “The STA remains firmly opposed to a tourism levy in any form,” Marc Crothall, chief executive of the organisation, told The Herald.

“We have had direct discussions with the Scottish Government and been vocal in the media for many years on this issue, highlighting the reasons why a tax on domestic and international visitors is harmful to the tourist economy in Scotland, the main one being it will have a significant impact on our ability to remain competitive as a global tourist destination.

“We hear the arguments that a tourist tax is commonplace in many destinations around the world, however in Scotland we welcome international visitors with one of the highest rates of VAT in the world and wave them goodbye with the highest level of air passenger duty in Europe.

“Our visitors are taxed at every point in their journey and experiences while in Scotland and this is not limited to international visitors.”

With people who reside in the UK accounting for around 70 per cent of tourist numbers in Scotland, Mr Crothall also underlined the industry’s view that a tourist tax would have a major impact on the domestic market.

“This is a tax on all visitors… we as consumers will all be directly impacted by the introduction of a tourism levy,” he said.

“The cost-of-living crisis has had an acute impact on tourism and hospitality; bookings are down, spending has dropped off a cliff and the forecast for next year is of huge concern across all sectors of the tourism industry.

“Other destinations where a tourist tax has been introduced have significantly lower rates of VAT and APD.

“We cannot compare the UK to these destinations. We are simply far more expensive for tourists. When tourists visit these destinations, they are able to spend more [and] stay longer because ultimately they are taxed less.”

There may be a certain logic to a mechanism that can help councils raise revenue and pay for important services when they are awash with visitors.

But, with perhaps the exception of Edinburgh, tourists are not yet visiting Scotland to the same extent as they were before the pandemic. And just as importantly, the prospect of making Scotland’s tourism industry less competitive on the world stage should surely be avoided when so many businesses in the sector are struggling to survive.

For the sake of this important industry, the idea of a tourist tax should be parked for now.

Only when visitor numbers have recovered to pre-pandemic levels, and the UK has a more competitive tax regime when compared with other countries, can the idea proceed with any degree of credibility.