Scotland consults on tourist tax

The Scottish government is consulting on plans to introduce a tourist tax to  enable local authorities in Scotland to apply a visitor levy on short-term overnight stays

The move is in response to growing numbers of visitors, with over 1.2m more overseas visitors to Scotland last year compared to 2011.

There has been significant growth in both overnight and day visitors in specific parts of Scotland, such as Edinburgh and some parts of the Highlands, which is putting pressure on the local environment and on activities that maintain and enhance the tourist experience.

Kate Forbes, minister for public finance and digital economy, said: ‘Creating a discretionary power to enable local authorities to apply a levy on visitors is a means of allowing local authorities to respond to local circumstances more effectively whilst also allowing local tourism offers to be enhanced.

‘To give local authorities this power and create a new local tax requires an Act of the Scottish parliament. This consultation paper therefore seeks views on a broad proposition of enabling local authorities to choose to apply a levy on visitors staying overnight.’

Forbes acknowledged that ‘there are some important choices to make, especially in relation to the balance between national consistency and local autonomy.

‘As we envisage the levy would be collected by accommodation providers, this consultation seeks views on how the impact on individual businesses might be minimised.’

When Edinburgh suggested introducing a tourist tax last year, tourism authorities voiced concerns that such a levy could have negative impacts on individual accommodation and supply chain businesses and on the competitiveness of the wider tourism sector across Scotland. 

Tourism experts highlighted a number of issues, including rising wages, input costs and existing taxes, particularly VAT on accommodation, which is charged on holiday accommodation at the standard rate of 20%, higher than in most EU countries.

The consultation looks at a number of considerations for the introduction of a ‘transient visitor levy’, which include the best choice of name for such a tax. 

The broad options are identified as a flat rate per person per night; a flat rate per room per night; a percentage of accommodation charge; or a flat rate per night dependent on the quality of accommodation.

The consultation asks for input on how the visitor levy could be applied and enforced in special circumstances, such as cruise ship passengers who disembark for a day before re-joining the vessel; wild or rough camping, including in motorhomes and camper vans; travelling communities; or victims of  domestic abuse and others who may be housed in temporary accommodation because their normal home is unsafe for them to stay in.

The consultation says the application of a visitor levy should be for individual local authorities to determine, and sets out options for how it would be consulted on and then implemented. The receipts raised must fund local authority expenditure on tourism related activities, including responding to tourism pressures, in their area. 

In essence, this means that revenues raised by a local authority choosing to apply a visitor levy would be retained by that local authority and not be subject to any pooling or redistribution.

The consultation notes: ‘This is a radical departure from the established financing mechanisms for local government in Scotland which has a system of equalisation at its heart, intended to ensure all local authorities have the capacity to deliver equivalent levels of service. 

‘The hypothecation of receipts to spend on a particular activity is also a radical departure from the wider system of government finance in Scotland and indeed the rest of the UK.’

The consultation also points out that a long lead time will be required for the introduction of any levy, as visitor accommodation is often booked well ahead, and in the case of, for example, conferences, this can be several years in advance.

Another issue in scope is whether to extend the levy to other visitor activities throughout Scotland to support the tourism industry.

It says the timescales for parliamentary scrutiny of a bill, and for the making of any secondary legislation which may be required, mean this power is not likely to be available to local authorities until the summer season of 2021 at the earliest.

The consultation closes on 2 December.

Scottish consultation: Principles of a Local Discretionary Transient Visitor Levy or Tourist Tax


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