Why cash-strapped councils in Scotland are going cold on SNP tourist tax
SNP ministers appear to be listening to the tourist industry’s complaints about the way the visitor levy has been set up, but will they actually do anything about it?
Cash-strapped councils across Scotland, some of whom have had to make unprecedented increases in Council Tax whilst slashing local services, are unsurprisingly eager to find new sources of income. Therefore, when the SNP legislated for a new visitor levy – or “tourist tax” – there was enthusiasm in some local town halls that this would provide a welcome new source of revenue.
Unlike local residents, tourists don’t have votes, and therefore what would be the harm in charging visitors extra sums which could be put towards enhancing local services? It looked like a win-win, and unsurprisingly a number of councils set about running consultations to determine whether a visitor levy should be introduced, and if so at what level.
First out of the traps was the City of Edinburgh, which has now settled on a visitor levy at 5 per cent plus VAT. Given the cost of overnight accommodation in Edinburgh, particularly during the busy summer period, this is likely to raise considerable sums. However, already there has been a backlash from industry complaining about the difficulties in administering what will be a complex scheme, particularly in the context of dynamic pricing.
Simplicity of a flat charge
Many of us will be familiar with the concept of paying a modest tourist tax when we visit other countries in Europe, seeing a few Euros added to hotel bills, but what is introduced for Scotland is nowhere near as straightforward, being based on a percentage of the accommodation costs rather than a flat charge. This adds to the complexity for businesses having to collect and account for the levy, as well as substantially increasing the overall cost.
Along with industry representatives, I have been making the case in Holyrood for councils to have the option here to introduce a flat charge as an alternative to a percentage, something that the current legislation does not permit.
Trade bodies such as the Scottish Tourism Alliance and the Association of Scottish Self-Caterers have argued strongly that this is a change that would be of substantial benefit to their members, who are already struggling with a difficult domestic tourist market and rising costs due to both UK and Scottish Government taxation, and energy and food prices.
It does seem the Scottish Government is listening, although they have created a great deal of confusion about their stance. A week past Friday, the SNP public finance minister Ivan McKee wrote to members of the Economy and Fair Work Committee at Holyrood to say that the Scottish Government would now be taking steps to allow councils to make the requested change. It seems, however, that this was an error. Three days later the message was corrected to say that the Scottish Government was only “considering” a change.
When I pressed McKee on the matter in the parliament chamber last week, he seemed to indicate this was a reform that the Scottish Government was willing to take forward, but due to the lack of parliamentary time there was no prospect of this happening until after the Scottish election in May.
This delay is entirely unacceptable both to the Scottish Conservatives and to the tourist industry, as it will leave councils and the sector in a state of limbo, not knowing how a visitor levy might be implemented. In the meantime, councils like Edinburgh are pressing ahead, determined that the levy will come in from summer next year on the percentage basis already legislated for.
Tory offer to help SNP
As my late mother would say, it is all something of a burach. It does look like the Scottish Government is prepared to allow councillors greater flexibility to introduce a fixed-rate visitor levy, but that does not look like it is going to happen soon. The Scottish Conservatives have offered our assistance to the SNP to bring forward emergency legislation to get this important change made before the beginning of the next financial year. It just requires the political will to make it happen.
In the meantime, councils across Scotland seem to be going cold on the notion of introducing a visitor levy at all. Just last week councillors in Argyll and Bute voted to pause consideration on a visitor levy in the area, following a consultation which found only one in five who responded supported a proposal to introduce a 5 per cent charge.
This followed on from serious concerns raised by local businesses that a visitor levy at that level would seriously deter visitors and do considerable damage to a local economy that is heavily tourist-dependent.
The confusion caused by Scottish Government dithering over the matter was one of the reasons cited by Argyll and Bute councillors in coming to the decision that they did. And they are not alone. We have now seen other councils, including Western Isles, Shetland, Orkney and South Ayrshire taking a decision not to proceed with a visitor levy in their areas.
Time to reconsider
A number of other proposals remain live, including in Perth and Kinross, Stirling, Dumfries and Galloway, and Glasgow, and it remains to be seen whether these will now be put on pause pending clarity from the Scottish Government as to what the options will be. Certainly it must make sense for there to be a moratorium on any final decisions now being taken until the full picture is understood.
Highland Council, one of the early enthusiasts for a visitor levy, has commissioned an independent economic assessment to look at the overall impact on visitor numbers and therefore the local economy, prior to proceeding. This is an obvious step that any council now considering a levy should be doing.
Taxing tourists might seem an attractive option at first glance, but the unintended consequences could be seriously detrimental. That is why everyone considering a visitor levy now needs to stop, take a breath, and carefully consider next steps.
Murdo Fraser is a Scottish Conservative MSP for Mid-Scotland and Fife
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