North Coast 500 architect slams 'damaging' SNP tourist tax

Robin Worsnop, founder of Edinburgh-based Rabbie’s Tours, was among a chorus of business voices who raised concerns around creating an additional charge for visitors, as well as bringing more administration for firms as the council in the Scottish capital presses ahead with its plans.

While potential benefits include easing pinch-points and better accommodating over-tourism, how the funds will be channelled remains under debate.

Councillors last month agreed a draft scheme and said it is anticipated that the levy will generate tens of millions of pounds a year to reinvest in the city’s infrastructure and sustainable tourism from summer 2026.

Edinburgh is holding a public consultation seeking further input from residents, visitors and businesses, and its final scheme is expected to be agreed in January 2025, allowing the 18-month implementation period to begin.

Edinburgh would become the first place in the UK to launch such a city-wide levy, with Glasgow also considering a tourist tax.

The Scottish capital version will see visitors staying in accommodation will be required to pay a small, fixed fee per night of 5% of the accommodation cost, capped at seven consecutive nights.

Robin Worsnop, said government is 'disingenuous' in its position (Image: Gordon Terris) The levy will apply to paid accommodation including hotels, short-term lets, hostels and bed and breakfasts, but will exclude stays in campsites.

The levy is expected to raise £45-50 million a year by 2028/29.  Revenue generated will be reinvested directly into initiatives that “benefit residents and enhance visitor experiences”

Cammy Day, council leader, said the tax will “significantly increase our ability to invest in the visitor experience and the tourism pressures we face, from keeping the city clean to responding to our housing emergency, so that everyone can continue to enjoy all that the city has to offer”.

Mr Worsnop, now a non-executive director at Rabbie’s, which he set up in 1993, told Business HQ Monthly in an exclusive interview for our Big Read: “In the country which is the birthplace of Adam Smith I find astonishing that our political leaders can assert glibly that a 5% or even greater surcharge will have no effect on consumer spending or demand.

“This is in addition to some of the highest VAT rates in Europe so locals and visitors alike will be surcharged 25% or more for a night away from home. In Ireland there are many stories of hospitality businesses unable to continue when their VAT rate was increased from 9% to 13.5%.

“So until there is a reduction in our national VAT rate it is clear to me this will be a damaging step and erode private sector investment, which as a wealth creator I find quite disheartening and very disappointing.”

Scotland’s famous North Coast 500 tourist route was named the favourite scenic driving route in the UK. (Image: Getty Images) Mr Worsnop said it could lead to investment moving elsewhere.

“There has been a little bit less spend on non-core accommodation in the local economy this year, is something they have noticed, so it is something we are aware of a potential challenge,” he said.

“Of course this would make it even more of a challenge, so it is about that kind of affordability for people the costs and competitiveness of Scotland as a destination in the long term and whether it is going to be able to invest in its quality and sustain the same level of demand to help create further investment or not.”

Mr Worsnop said: “From our perspective we would probably focus outside of places where we didn’t see the demand growing and that would be essentially in southern Europe and the like because we are seeing their demand has returned to pre-pandemic levels.

“We envisage we are going to carry the same number of passengers that we did in 2019, it is about that level, but it has taken a long time, so as you are looking into the future and your future investment plans, this is a factor if you are going to predict a downturn in demand then you are naturally going to look elsewhere.

“These things all have an impact and I think anyone who tries to argue that they don’t is being disingenuous.”

Mr Worsnop, who started out with one vehicle and now has over 100, said: “Money will be extracted out of the private sector economy and spent by the public sector so hopefully t doesn’t go on councillors’ pet projects and it goes to some significant improvements to the destination.

“However, it is the state deciding where to spend and invest and I ama great believer that the private sector is the dynamic engine that is a wealth creator that grows the economy and grows the tax pie for the state to benefit from.

“If you keep nibbling at the edges then ultimately entrepreneurship and investment will start to decline.

“We are a travel brand HQ-d in Edinburgh but we are looking to grow the brand across lots of different destinations outside Scotland we well.”

He added: “It’s not doom and gloom but Edinburgh is a very important part of our ecosystem. It is where we were born as a company and where we would like to continue to be focused.

Marc Crothall, chief executive of the Scottish Tourism Alliance, which is the largest member organisation for tourism and hospitality businesses in Scotland and the leading representative body for the sector, said councils should carefully consider the wider impact of introducing a tourist tax.

He said: “Whilst tourism charges are routinely applied in many parts of the world, councils must carefully consider the destination’s price competitiveness. There is a price tipping point for every customer, even the high-spending US market. 

“Quality of experience and value for money go hand in hand. With destinations around the world becoming more attractive, accessible, and affordable, electing to add more cost onto a visitor’s bill carries substantial risk. Scotland and the UK are already a heavily taxed visitor destination.

"We mustn’t forget that this charge will apply to Scottish residents or even those residing from the same local authority area. We have seen this year that the high cost of holidaying at home and poor weather has given rise to a downturn in domestic visits and visitor spend. For those who come from further afield to visit for leisure or business, their expectations are high when it comes to quality versus price.”

Marc Crothall has raised wide-ranging concerns (Image: STA)

There also is a misconception it is only hotels will be impacted.

Colin Borland, director of devolved nations at the Federation of Small Businesses, highlighted concerns among smaller companies.

He said: “The visitor levy will before long be a fact of life for most of us, whether we are staying for work or leisure in one of Scotland’s most popular visitor destinations or business owners administering and collecting the charge.

“While it might be new in Scotland, most of us know from our own travels such charges are common across Europe and further afield.

“It would be a mistake, however, to think this means that any schemes introduced in Scotland will just automatically work. The Scottish Government is leaving it up to individual councils to design key elements of their schemes – around, for example, exemptions – and it’s crucial that authorities get their schemes right.  It’s essential that accommodation providers, who will be the ‘face’ of the levy when they collect it, aren’t left to navigate complex and unclear rules.”

Mr Borland also said: “The schemes must also be designed with the needs of actual accommodation providers in mind. This is a sector dominated by small, independent hotels, B&Bs, guesthouses and operators of short-term lets. The Scottish Government’s own impact assessment of the visitor levy states 93% of registered enterprises in the accommodation sector are small operators. The costs and work involved, such as updating accounting software, are a different challenge for them compared to national hotel chains.

“Besides, while these small businesses will collect and administer the levy, there’s no guarantee they’ll play a part in deciding how it works. Just look at the Visitor Levy Forum proposed by the council to advise on spending plans in Edinburgh. There are places for various community and industry representatives, but currently no room for the smaller accommodation providers who will be responsible for making the scheme a success. That seems odd.”

Mr Borland added: “Their views don’t necessarily mirror those of the big operators. The majority of FSB members want to see funds invested in local infrastructure and facilities – from roads to public toilets - which will improve the overall environment, not just for tourists or tourism businesses, but for everyone.

“Thankfully, there is still time to fine tune plans. Getting it right for the small operators is vital to the ongoing success of our tourism industry, which, just in case anyone needs reminding, generates £4.5bn a year and supports more than 200,000 jobs.”

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Asked on the pros and cons of the tourist tax, Fiona Campbell, chief executive of the Association of Scotland’s Self Caterers, said: “Tourism is a force for good and vital to Scotland’s economy. City of Edinburgh Council must tread carefully with these plans and ensure that the introduction of a visitor levy does not cause more harm than good.

“Alongside the upcoming consultation, we would expect a full economic impact assessment to accompany the proposals. The early signs are far from encouraging as the council has almost doubled its estimated running costs and increased its set-up budget by a whopping 260%.

“It is also very concerning an even higher levy has been proposed than the 5% in the draft scheme and we would urge extreme caution against setting the levy at a level that could tip the balance towards this scheme having a detrimental impact to Edinburgh’s reputation as a leading destination.”

Edinburgh is holding a consultation (Image: Getty Images) Ms Campbell said: “With the visitor levy, we must ensure history does not repeat itself with the disastrous experience of short-term let licensing. The accumulative regulatory impact could cripple businesses at a time when recovery is precarious and we should be supporting them for a sustainable and prosperous future. Edinburgh Council’s STL regulations has seen a hat trick of court losses, all of which could have been so easily avoided if it listened to industry on how to make its policies proportionate and legally sound. This underlines the importance of genuine and meaningful business and local authority engagement for the visitor levy so that any unintended consequences are mitigated.”

In response to a question about who could potentially be impacted, Ms Campbell said: “It is clear that the burden of this scheme won’t be spread evenly. While cruise ships are exempt, it will be relatively easy for multinational hotel chains and global platforms to navigate the change but for small and micro businesses, it is a different story. Many will have to upgrade their payment systems so the proposed 1.5% that Edinburgh based businesses will be allowed to keep from the levy to cover administration won’t be sufficient to offset the full costs. 

“Aside from operators, our valued domestic market will be hit in the pocket. Indeed, a ‘tourist’ tax is somewhat of a misnomer as it will be paid by ordinary Scots visiting parts of their own country who have already made contributions to local services through taxation. The levy runs the risk of damaging the competitiveness of Scottish tourism at a time when our domestic market remains sluggish. Price sensitive consumers may switch to holiday in York instead of Edinburgh, or the Lake District instead of the Highlands, hitting local economies and communities. We must therefore guard against making our industry less competitive otherwise holidaymakers will simply switch to more affordable destinations elsewhere in the UK or abroad.

“Those in favour of the levy frequently brush aside concerns since they pay it while holidaying abroad. However, they need to understand the full context – our European neighbours do not charge 20% VAT on accommodation. A new visitor levy in Scotland would be in addition to VAT, whereas in 25 EU countries a discounted VAT is applied. This would clearly further disadvantage Scotland compared to competitor visitor destinations.”

There are fears it could lead to further closures, Ms Campbell said: “Small businesses like self-catering operate on tight margins so any additional administrative burden, especially in the current climate, could tip more operators over the financial cliff edge. The accumulative regulatory burden is nothing short of relentless – from changes to business rate thresholds as well as onerous short-term let planning and licensing requirements – all compounded by a visitor levy. This also affects a sector that is still recovering from the pandemic and the cost-of-living crisis so the levy comes at the most inopportune moment for self-catering operators. Self-caterers feel that we are being shrunk through cumbersome STL legislation and now taxed on top.”

Fiona Campbell has outlined operators' concerns (Image: ASSC) Again, how the revenue is spent is a concern. Ms Campbell said: “While cash strapped local councils may view this as a quick and easy revenue raiser, any funds raised must be ringfenced for tourist infrastructure spend only. Edinburgh Council has earmarked portions for affordable housing but our sector refutes the claim that tourism accommodation is responsible for the housing crisis. This has been caused by the abject generational failure to build enough housing – all the while yet more hotels and student flats are nodded through the planning system on sites suitable for homes – or to make any headway into tackling the city’s position as an empty homes hotspot with over 9,000 of such properties languishing unused.”

Mr Day, council leader, also said: “By better supporting these services we can secure Edinburgh’s future as a top global destination.

“These proposals have been shaped by the views of residents, visitors and industry. We’re committed to making sure this is the best levy for Edinburgh and will begin our formal consultation as soon as the Scottish Government allow.

“This is a once in generation opportunity for Edinburgh and I look forward to the many benefits a visitor levy will bring, allowing us to reinvest tens of millions of pounds in sustaining and improving the things that make our city so special – for our visitors and residents who live here all year round."

Neil Ellis, chairman of the Edinburgh Hotels Association, said that it “welcomes the introduction of the visitor levy for its intended use of improving the experience of all visitors, local, national or international, through additional spending”, and Christina Sinclair, director of Edinburgh World Heritage, said the levy is “a fantastic opportunity to further enhance Edinburgh’s reputation on the world stage as a must-visit destination”.

Charlie Cumming, chief executive of the Edinburgh & Lothians Greenspace Trust, said it is “in support of the funds raised from the proposed visitor levy to provide additional resource to make improvements to the city’s public spaces”.

Roddy Smith, chief executive of Essential Edinburgh, said: “We welcome the three potential funding pots which if used appropriately will have a significant impact on how our city looks, and how we can support our crucial heritage and arts/event sectors. Importantly, it will also invest in dedicated marketing and promotion, to ensure our successful tourism sector continues to grow sustainably. With an effective public and private partnership driving this work, we are excited that real progress can be made.”