A tourist tax is set to take tens of millions out of the pockets of the one in four Scots who decide to holiday at home, leading to calls for local authorities to boycott it.

Analysis indicates that if set at 5%, the minister-approved visitor levy would raise £142m if brought in across the nation but there has been a warning that it also acts as what has been described as a "stealth tax" on Scots.

Based on Visit Scotland's estimates in 2023, Scots residents accounted for 25% of the nights spent in holiday accommodation, which taking average room costs into account, means up to £35m would come out of Scots' pockets if councils sign up to it.

The Scottish Bed & Breakfast Association which has been tracking the progress of the levy has raised concerns over a lack of understanding on how the tax would hit Scots.

It fears that the tax will severely damage the nation's economy because it will have to be paid on top of 20% VAT and what it called "very high alcohol, flight departure taxes and business rates".

They are appealing to local authorities to boycott the tax to visitors and Scots "as it will of course discourage travel and tourism in Scotland and will lose our crucial tourism industry's competitiveness against Europe and even England."

Edinburgh, Highland and Aberdeen were among councils supportive of the idea of a tourist tax six years ago.

(Image: Newsquest)

The majority of people who responded to a recent tourist tax survey in the Scottish capital opted for a levy of up to £5 on a £100 room (5%).

A Edinburgh council modelling analysis estimated that a 7% tax would generated £35m. The council has since said that the proposed visitor levy could help the city raise about £25m in extra funding for services and to subsidise tourism infrastructure - which is estimated to be at around 5%.

A council analysis states that even at 5%, the levy "would be smaller than other European cities".

In August 2019, Highland Council calculated it could generate as much as £10m a year from a levy, and reinvest the money into improving infrastructure such as roads, car parks and public toilets.

MSPs passed the Visitor Levy (Scotland) Bill last month and it will allow local authorities to add a charge to overnight accommodation such as hotels, B&Bs and holiday lets.

Many European countries, including parts of Germany and Spain, already have levies.

Manchester introduced its City Visitor Charge last April to pay for measures aimed at attracting more visitors.

Its £1 per room, per night fee, is estimated to have raised about £2.8m in its first year.

When first proposed by the Scottish Government last year they said that cash raised could be used to help attract more visitors to Scotland.

(Image: PA)

Edinburgh City Council Cammy Day previously  insisted the charge would be “less than the price of a cup of coffee” for many visitors, adding: “It is common practice across the world. Many, many major cities across Europe have had this for many, many years.”

So if there was a 5% levy on £100 for a room it would result in a £5 tourist tax.

Accommodation providers would be responsible for collecting the charge and passing the money on to their local authority.

Each local authority will ultimately decide whether it will introduce the tax and how much it will be but there is no upper limit.

According to a Scottish Government consultation, some 17 of Scotland's 32 councils, along with local authority representative body Cosla, back the introduction of the tax.

The first tax could be introduced in 2026 and the City of Edinburgh Council is expected to be the first city to put it in place.

David Weston, chairman of the SBBA said not all the 32 councils in Scotland would have to introduce the tax to get near the £142m that would be raised if a 5% levy was brought in as some, for example Edinburgh and Highlands have a hugely disproportionate share of overnight visitors.

David Weston (Image: Scottish Parliament)

The SBBA say the amount raised by a 5% levy from Scots if brought in across the country would be 25% more than if the higher rate of income tax went up by 1p.

"So what is labelled as a visitor levy may be seen by Scottish people as more like a stealth tax on them. That is a significant new tax, and we don’t feel there has yet been enough informed public debate about it. This is a very high-risk new tax and needs the public fully aware and fully behind it to be sustainable.

"The thousands of small businesses that provide accommodation across Scotland - B&Bs, guesthouses, hotels and self-catering businesses - are worried about the effects of the levy," said Mr Weston.

“Scotland is already starting to get a perception of being expensive. Our VAT on accommodation is 20% compared with 10% in France, and we already have among the highest taxes on alcoholic drinks, flights and business premises.

“There are already signs of our domestic tourism faltering as outbound tourism by contrast grows strongly. If an extra tax is added on top, we fear Scotland will suffer severe damage to its tourism sector, which is crucial to Scotland’s economy.

“And small accommodation providers - often microbusinessses like B&Bs - will bear the brunt by having to add the levy into our prices - thus losing sales - and by having all the burden of collecting it.

“But of course this won’t just hit accommodation owners - the so-called visitor levy is actually an accommodation tax, £1 in £4 of which will be paid by Scottish people."

A Scottish Government spokesman said: “The Scottish Government does not recognise this figure. It is up to individual councils to decide whether they wish to introduce a visitor levy and at what rate. They can only do this after the required consultation with local businesses, communities, and tourism organisations and an assessment of the impact of introducing such a levy.”

Cosla has supported the tax pointing out that the  cost of maintaining the local environment and public services, which draw tourists, "falls heavily on the public purse". 

"Sustaining this is at significant risk without new ways to invest. Whilst recognising the cultural and economic benefits of tourism, the cost of tourism is borne by the local citizen. There is a case for this to be shared more widely," it said in a briefing.

"The tax could be collected as percentage of accommodation, or as a flat rate. It could also be progressive depending on the accommodation star rating. It does not need to be limited to accommodation, the tax could be collected as a use of infrastructure but most importantly be pertinent to local circumstances."