Tourist tax Scotland: Why levy will 'put off' visitors from travelling to rural Scotland

Visitors coming to stay in Edinburgh and Glasgow will have to start paying an extra tax for the privilege from as early as next year. In turn, the money generated from this 5 per cent visitor levy will be reinvested back into tourism infrastructure.

However, concerns are being raised that if taxes are introduced in other parts of Scotland, outside of the country’s two biggest cities, the move could have a negative impact on rural tourism.

Twenty-one out of 32 local authorities north of the Border are either consulting the public on plans to introduce a tourist tax, or discussing the idea amongst officials, according to research carried out by the Federation of Small Businesses.

Some are even considering having a rate higher than what has been agreed or proposed for Edinburgh and Glasgow, with Aberdeen City Council this week agreeing to press ahead with plans for a 7 per cent tourist tax.

However, the Scottish Hospitality Group are among bodies worried the move will have a negative impact on regions which rely on seasonal tourism, rather than year-round destinations such as Edinburgh.

Subscribe to The Steamie newsletter for daily political analysis

Stephen Montgomery, who is based in Dumfries and Galloway as director of the Scottish Hospitality Group, said “I am really not in agreement. When you put 5 per cent on in an area where tourism is seasonal and there are fluctuating prices, it could put a lot of people off coming to rural parts of Scotland where businesses need the tourism.

“Manchester has a great idea where it is £1 per person per room per stay. That is what it should be, because no-one misses that.

“But if you have a £300 room over five nights and are then paying 5 per cent on top of that, that is the balance between having money to spend or not, and we will lose out.

“If you are a tourist who only has so much money in their pocket, you will be making the choice whether to go to Aberdeen or Aberystwyth. This is not the time to be fleecing our customers for yet more money to cover the government’s failure to give councils a proper budget.

“It is different in the cities. But in rural areas where it is seasonal and communities depend on tourism, we need to think about this properly.”

Russell Fraser, managing director of Loch Ness Hub and Travel, said he also disagreed with the percentage model for a visitor levy.

After the Scottish Parliament passed the Visitor Levy (Scotland) Act 2024, it gave local authorities the ability to set a percentage rate of tax, with most proposing a 5 per cent rate.

However, Mr Fraser said it would be better to have a flat rate.

He said: “There is the potential for a visitor levy to be a positive thing, but in its current format I feel it is unnecessarily complex and extremely burdensome on small accommodation providers.

“In the Highlands, we rely heavily on B&Bs and we have already seen a number of them come on the market in the last six months due to ongoing changes to legislation. I am concerned this could be the final nail in the coffin for many of them.”

Mr Fraser said a flat rate of tax should be trialled in the Highlands as he believed the move would prove to be a “much more workable model”.

Elsewhere in the Highlands, tens of thousands of people every year flock to the North Coast 500 (NC500) - and those staying overnight could soon have to pay this tax too, as Highland Council is consulting on introducing a 5 per cent visitor levy.

A NC500 spokesman said: “We’ve long shared the concerns of many in the industry about what imposing yet another tax on Highland tourism will do to both consumer demand and to the very large administrative burden already placed on small, independent businesses’ shoulders.

“However, we accept that the Act has been passed by Holyrood and that the levy is coming. What matters now is ensuring that when introduced by local authorities, it does what all good taxes should do - bring the maximum benefit to local economies and communities while doing the minimum harm.”

The spokesman said the North Highland visitor economy “desperately” needed investment and stressed it was important Highland Council got the scheme right, suggesting that rushing through levy plans “would be a serious mistake”.

Argyll and Bute, Highland, Stirling and Falkirk are among other councils looking into introducing a 5 per cent visitor levy.

Several other councils told The Scotsman they are consulting the public on the idea in general, including Aberdeenshire, East Lothian, Fife, North Lanarkshire, Perth and Kinross, and West Dunbartonshire. Moray Council said it supported the idea in principle.

Meanwhile Scotland’s three island councils - Orkney, Shetland and Comhairle nan Eilean Siar - have joined together to look at the idea of a tourist tax.

Urban Foresight has been appointed to investigate the feasibility of a tourist tax in those three local authorities and, in September, Orkney Islands Council said there could be potential savings by working together on the proposals with Shetland and Cohairle nan Eilean Siar.

Clackmannanshire, Dumfries and Galloway, Inverclyde, Midlothian, South Lanarkshire and West Lothian all told The Scotsman they had no existing plans to introduce a visitor levy.

The wording of this new tax is also a point of contention - officially, it is called a visitor levy, but many have used the phrase “tourist tax” to describe it instead.

Some tourist groups feel this is giving Scots a false narrative about the realities of the levy.

Mr Montgomery said: “People don’t understand that if you live in Scotland, you will still have to pay it. If you go to the city for business, you will have to pay for it.

“If you live in Carlisle and come across the border to Gretna, you are liable for it. It is not a tourist tax, it is just a complete tax and it will drive people away from staying in rural Scotland where we rely on hospitality and tourism.”

Mr Fraser added: “No one in the island communities seems to be aware that if a family member goes into hospital and they go to visit them, they will have to pay this levy. There is a genuine impact on the lives of people here in Scotland.

“Everyone thinks ‘tourism levy, no problem, it is done elsewhere’. But it is flawed in my eyes.”

A Scottish Government spokesman said: “Funds generated from a local visitor levy will be used to enhance facilities and services substantially for or used by visitors. The legislation requires local authorities to consult local businesses and communities before introducing a levy.

“They would also be required to provide a lead-in time to allow businesses to put systems in place to collect the levy, helping to alleviate any administrative burden, and to publish assessments of how the measures are affecting local businesses.

“Local authorities have a range of options when considering a levy in their local area. They can choose to only charge the levy in a particular geographical area, or at specific times of the year.

“As a local tax, the legislation therefore allows for variation across different areas, rather than applying one approach across Scotland.”