A tourism levy isn’t the way to go, and here’s why - Ben Spier

Several councils, including Argyll & Bute and Fife are considering whether to begin a public consultation on introducing a levy, while Edinburgh and the Highlands have both already launched them. So, summer 2026 is realistically the earliest date that we’re going to see a levy in place in a council area.

Despite it being approved by Scottish Parliament, I hope that local authorities pause and wait until they know the impact of other interventions affecting the tourism sector such as increases in employer NICs, the Short Term Let Licensing Scheme, Short Term Let Control Areas, abolition of Furnished Holiday Let regime etc. While it might sound like more money in the coffers at face value, there are some major administrative and competitiveness downsides to weigh up, and potential alternative routes to consider.

Firstly, a tax on visitor accommodation risks deterring overnight trips to Scotland, impacting the success of many small businesses, including self-catering micro-businesses and those myriad other hospitality and other businesses dependent on tourism. An APPG for Hospitality report supports this, showing that day visitors spend an average of £36, while overnight visitors spend £193 per visit. So while it might appear to be the “easy” approach to tax overnight visitors, surely they are precisely the ones you don’t wish to deter.

A report we commissioned with Oxford Economics highlighted that short-term let spending contributed £3.8 billion to Scottish GDP and supported 65,000 jobs in 2021. This is just a fraction of the total tourism spend, indicating the overall figures are much higher.

Then there is the fact that implementing and managing a tourism levy is complex and costly, adding administrative burdens to already-stretched local authorities. For instance, a Midlothian council report indicated that while the levy could generate around £180,000 annually, the operational costs might range from £190,000 to £500,000 per year.

The tourism sector is already heavily taxed through business rates, corporation tax, employer/employee/income taxes and some of the highest VAT levels in Europe, making the UK notoriously uncompetitive from a price perspective. So, instead of introducing a new tax, efforts should therefore be made to ensure that existing revenues are directed to the local Scottish communities that need them. Redirecting current taxes is more efficient than imposing a new tax scheme on local authorities.

Instead of discouraging visitors and risking their local spending, the focus should be on increasing taxes in areas that do not contribute to local economies. For example, according to the recent BiGGAR Economics report on the self-catering sector, it accounts for only 0.8 per cent of Scotland’s housing stock, considerably less than the 3.6 per cent that are economically inactive empty properties. It would therefore be more sensible to increase empty home council tax premiums, encouraging owners to sell or let them. A levy could also address landbanking by taxing undeveloped land with planning permission, which also contributes to housing shortages.

In conclusion, a tourism levy is not the solution. Local authorities should ensure existing taxes benefit local communities before introducing a new system and attention should also be given to factors that do not contribute to local economies but exacerbate housing shortages.

Ben Spier, Head of Regulation and Policy, Sykes Holiday Cottages