Visit Scotland backs visitor tax which could raise up to £118m a year

A Federation of Small Businesses in Scotland survey of small and medium-sized enterprises found that over half (51%) said 'no' when asked if they support the introduction of a local levy. Some 69% of businesses in the accommodation and food services sector were opposed.

It has further emerged that the Convention of Scottish Local Authorities, the national association of Scottish councils which acts as an employers' association for its 32 member authorities and has backed the tax says it should be extended it to cover cruise ships' accommodation.

READ MORE: Pressure on Scottish politicians to get 'tourist tax' right

The controversial plan has come under fire from the likes of Airbnb which said the tax could threaten the vitality of an industry already facing pressure over plans to license short-term lets.

The company, which is a key hosting service for short-term let accommodation, has told SNP ministers that allowing councils to roll out a visitor levy could further harm a sector already facing increased costs.

In Edinburgh, organisations representing thousands of businesses have raised concerns about the levy sparking "negative sentiment" about Edinburgh around the world.

But it has emerged that Visit Scotland, which was established to promote the country as a place to visit to the rest of the world, has said in a briefing that a modest charge on accommodation would be "unlikely to significantly impact visitor numbers to Scotland".

Tourism is a key part of the Scottish economy, employing more than 209,000 workers, hosting millions of visitors every year from all over the world and contributes £4.5 billion to Scotland’s economy.

The charge would be based on a percentage of the accommodation cost, with each rate expected to be left to individual councils.

According to government estimates based on 2019 prices seen by the Herald on Sunday, if a visitor levy were implemented across the country revenues would range from £17m with a rate of 1% to £118m with a rate of 7%.

The three regions that stood to gain the most from implementing the levy was Edinburgh & the Lothians which would bring in between £6m and £41m depending on the tax rate. The Highlands & Islands would bring in between £3m and £21m and Greater Glasgow & Clyde Valley would generate £2m to £16m in income.

Visit Scotland says that the premise of a levy has the potential to provide an "additional means of investment for the sector".

It says that as funding raised from the levy will be required to be spent on the visitor economy, such as facilities or services substantially for or used by visitors there is "clearly an opportunity" for the fee to "become a means of delivering on our ambitions for the sector".

Its national tourism strategy Scotland Outlook 2030 has the ambition to make Scotland the world leader in 21st century tourism.

According to a Scottish Government analysis, 21 out of 27 European countries have some type of occupancy tax, broadly equivalent to a visitor levy, usually applied at a local government level.

The structure of these taxes varies between flat tax charges - such as a fixed fee per person per night, or a levy per room per night and proportional tax based on a percentage of the room rate.

A government business and regulatory impact assessment suggests that that there has been a grown in overnight stay visitor numbers to 2019 in Barcelona, Berlin, Lisbon, Hamburg and Paris despite the introduction of an occupancy tax.

Visit Scotland said in its briefing on the plan that revenue raised should be reinvested for the benefit of tourism in the country.

It advised that it would be "inappropriate" to propose the introduction of a levy in the absence of a clearly stated strategy for the use of the funds.

"Scotland’s tourism industry is still operating in an extremely challenging and uncertain economic landscape, with the cost of doing business rising for many," it said.

"If a discretionary visitor levy is to be introduced in particular locations in Scotland, we believe the revenue raised should be primarily reinvested in the infrastructure and support required to help those destinations secure responsible growth of the sector in line with net zero ambitions.

"This is an opportunity to raise the quality of the visitor experience through ambitious investments and programmes, which in turn will benefit our businesses, our communities and our environment, as well as our visitors. Driving responsible growth through investment will sustain and future proof our crucial visitor economy for generations to come."

It added: "Any concerns about impact on visitors could be mitigated through ensuring the levy is re-invested in the visitor economy, improving outcomes for visitors, residents and businesses alike. This would be one way to help ensure that the quality of the destination is commensurate with the price visitors expect to pay. To achieve this, revenues should be spent on delivering local/regional tourism strategies which work to realise the ambitions of the national tourism strategy."

According to government analysis set-up costs associated with the levy for small to medium size accommodation providers would be between £3,000 and £10,000 and on-going costs associated with making regular tax returns were likely to be around £300 to £400 per year.

Councils believe the costs for implementation will vary between regions and range from £50,000 to £250,000 per local authority. The largest costs are associated with administrative changes, changes to IT systems, consultation costs, and changes to staffing.

The bill was introduced in the summer by the Scottish Parliament's local government, housing and planning committee.

The legislation, if passed by MSPs, will give councils the ability to add a tax to overnight accommodation, based on a percentage of the total costs.

Edinburgh said its proposals included a £2-per-night charge added to the price of any room for the first week of a stay.

Councils would have to consult with local communities, businesses and tourism organisations before going ahead with the charge and if passed, the charge could be introduced by 2026.

Local authorities would also have to consult on where the proceeds of the levy would be spent before the tax is introduced officially.

The Scottish government has said that all funds raised must be reinvested into the local community, on facilities and services used by visitors, benefiting the local area and economy, and enhancing the tourist experience.

COSLA has backed what it called "the power to introduced discretionary taxation".

It said that this was relevant in the context of "stagnating" local government finance settlements.

It said the impact of the levy could be "significant" for local communities.

"Though revenues raised by the bill are hypothecated for re-investment in facilities and services used by tourists.. many local government services are used by residents and tourists alike.

"For instance, the revenues raised could be used to re-invest in communities impacted by tourism, such as strengthening transport links between remote rural communities or improving the quality of the built and natural environment.

"Far from making Scotland less attractive to tourists, we believe the visitor levy has the ability to strengthen Scotland’s tourist sector through much-needed investment in our communities."