Tourist tax is not all it’s cracked up to be - Iain Whyte

It is far easier to predict that the tourist tax will go ahead given the uncontained glee from many councillors as they seek to implement yet another tax in a UK system that already has the highest ever peacetime tax take.

It appears simple– make foreigners who visit pay for local services, but the facts tell a different story. First there are all the other taxes already raised from the accommodation sector, be it income tax, national insurance, business rates, corporation tax and most notably VAT.

Here, VAT is charged on tourists at 20 per cent while in most European countries, where “no one grudges a couple of Euros tourist tax”, the equivalent to VAT is often only 10 per cent. Our Edinburgh combined VAT and TVL will easily match the highest in Europe at 26 per cent and the far-left fringe of the SNP and Greens want to go even higher.

Then consider who pays the tax. In Edinburgh 80 per cent of our overnight visitors are from the UK. Many are from elsewhere in Scotland. The idea that you are soaking rich foreigners that don’t contribute to UK taxes is simply wrong.

The accommodation sector in Edinburgh is over 9 per cent of the economy and employs about 37,000 people - two and a half times the number the council does.

If the council’s bill from Labour’s massive employers’ National Insurance hike is £35m it is not unreasonable to assume the Edinburgh’s accommodation sector might end up paying close to £90m. That can only be recouped from customers or by cutting jobs, so adding another £45m a year in TVL doesn’t seem like a jobs or growth plan. Small businesses are already saying they might swallow the TVL at times to keep room rates low and remain competitive.

Meanwhile the related hospitality sector, over 5 per cent of Edinburgh jobs, has been suffering as Business Rate reliefs in England were not passed on by the SNP Scottish Government. They need tourist business too if we want year-round jobs and an excellent choice of places for a night out.

I have tried in the past, but can’t stop the TVL, so instead will try to mitigate the impact on Edinburgh businesses. The proceeds must be spent as the legislation states on things that grow the economy, and we need a reasonable transition period as businesses prepare.

Longer term we need a review of the impacts as we are in danger of killing the goose that lays the golden eggs. It would be a shame if we end up with a smaller accommodation sector dominated by internationally owned high-end corporates rather than innovative local businesses.