Home   News   Article

EXPLAINED: Scotland's proposed tourism tax

By Alasdair Fraser

Register for free to read more of the latest local news. It's easy and will only take a moment.

Click here to sign up to our free newsletters!
Camper Van invasions have frustrated some locals in the Highlands
Camper Van invasions have frustrated some locals in the Highlands

Legislation to give local authorities the power to apply a visitor levy, or "tourist tax", has been published – to great furore.

While some welcome it as a means of helping communities, hard-pressed council budgets and raising much-needed cash from hordes of international and domestic visitors, others fears it will deter tourists who provide a lifeblood to the economy and pile more red tape and costs on businesses.

If passed by MSPs, it will give councils the ability to add a tax to overnight accommodation, based on a percentage of the total costs.

Edinburgh has said its proposals included a £2-per-night charge added to the price of any room for the first week of a stay.

In the Highlands, opinion is split.

Opposite sides of the argument – Conservative MSP Jamie Halcro Johnston and Scotland's First Minister Humza Yousaf.
Opposite sides of the argument – Conservative MSP Jamie Halcro Johnston and Scotland's First Minister Humza Yousaf.

So, what is a tourist tax?

A tourist tax is any revenue-generating measure targeted at tourists.

Often, it can be aimed at combating the negative effects of growing tourist numbers including the noise and hassle that accompany mass tourism.

More and more countries, regions and cities around the world have been introducing the modest taxes with a view to funding local improvements and infrastructure.

While now widely accepted as the norm in many areas of Europe, tourist taxes tend to stoke controversy and concern among the business community when first proposed and implemented.

As of 2023, 21 out of the 27 EU member states charge occupancy taxes.

They are usually small percentage or flat fees levied by local, regional or national administrations indirectly through accommodation providers or holiday companies, and typically aimed at overnight visitors.

But at the extreme end of the spectrum, Bhutan in South Asia charges $200 US per visitor per day, which is believed to be the world’s highest tourist tax.

Camper vans parked in Culloden Woods carpark on the 20th July 2021. Picture: Staff photographer..
Camper vans parked in Culloden Woods carpark on the 20th July 2021. Picture: Staff photographer..

Why are tourist taxes growing in popularity internationally?

Those negative impacts generated by over-tourism can also include higher rents and prices in restaurants and shops, a lack of affordable housing stock to buy, the pressure on public services, and, particularly in a Scottish Highland context, the damaging impact to the countryside in everything from littering to dirty camping and dumping of effluent from camper vans.

Pockets of local unrest and dissatisfaction in many nations have built momentum towards the creation of tourism taxes, while the cost of living crisis and the impact of escalating inflation have added to the incentives for authorities to find new sources of income.

How do tourism taxes work?

Collection of tourism taxes is a fairly straightforward process, with several avenues open to local authorities and governments.

The cruise industry, associated with sudden large scale influxes of visitors to small communities, is one that can be easily targeted through operators.

Many countries in Europe charge a per-day tax on rooms in hotels and other temporary accommodation.

Guest house owners and other accommodation providers can be legally bound to add a levy a bill, either at a flat rate or by percentage of accommodation, while museums, galleries and attractions can be similarly instructed to add a small supplement to entry fees.

Those levying tourists then have to declare the additional sum raised and pass it to the local authority.

What is the Scottish Government’s visitor levy legislation and what does it mean?

The Visitor Levy (Scotland) Bill, if it survives rounds of consultation, and parliamentary debate and scrutiny, could be available to Scottish local authorities as a revenue raising tool by 2026.

If passed, it will give a local authority the power to introduce a tourist tax in its area, if it so wishes to.

The levy, as it stands, would be a percentage of the overnight accommodation cost at a rate set by the local council.

Councils would be able to apply a visitor levy in any part or all of its area.

The levy would be collected by the accommodation providers and passed to the relevant local authority, probably on a quarterly basis.

It would apply to almost all types of overnight accommodation within the area, including hotels, self-catering accommodation and campsites.

One option would be for a local authority to ring-fence tourist tax income for a specific use or project.

In consultation, the expert advisory group led by VisitScotland will bring together tourism industry groups and local governments to discuss how best any visitor levy can be implemented and to develop national guidance for local authorities.

Tom Arthur
Tom Arthur

What does the Scottish Government say?

Public Finance Minister Tom Arthur has stressed that Scotland’s status as “a very popular tourist destination” for domestic and international visitors is welcome and has “a significant and positive impact on the Scottish economy”.

He added: “Giving councils the power to introduce a visitor levy is one tool that will provide additional resources to continue to attract visitors to Scotland.

“Levies on visitors staying in paid-for accommodation are already used around the world and it is reasonable for local areas to want a small contribution from tourists to help support and sustain visitor economies.

How do local governments view the proposal?

COSLA’s resources spokeswoman, councillor Katie Hagmann said: “COSLA welcomes the Scottish Government’s move to give councils the power to apply a visitor levy.

“This represents a key step towards reaching COSLA’s longstanding goal of a more empowered Scottish local government.

“COSLA has consistently called for the ability of councils to set and raise taxes based on what is needed and decided locally.

“By providing each local authority with the power to set a rate charged to visitors, and to do so independently of the Scottish Government, the Local Visitor Levy empowers local decision-making, with councils able to respond to the needs of their area and the people who live there.”

Tony Story of Kingsmills Hotel. Picture: Gary Anthony.
Tony Story of Kingsmills Hotel. Picture: Gary Anthony.

What do opponents say?

Highland MSP Jamie Halcro Johnston, the Scottish Conservative shadow minister for business, trade, tourism and enterprise, said: “It is incredible that the first action of this SNP Government in supposedly resetting its relationship with businesses is to hit hotels, B&Bs and self-caterers with a new tax.

“Many of those businesses already face a higher tax burden than their counterparts in England and Wales because of the SNP’s decision not to pass on the 75 per cent rates relief, and now they face a further, potentially unlimited tax.”

Fiona Campbell, CEO of the Association of Scotland’s Self-Caterers, said: “The visitor levy plans arrive at a time as our sector is already being hit with a never-ending juggernaut of regulation when the government and industry should instead be working together to reduce the burden on small businesses to support a sustainable and prosperous future for Scottish tourism.

"Businesses have endured a global pandemic and are now being squeezed by a cost-of-living crisis. These proposals may add more risk and uncertainty to a sector where the domestic market makes up 70 per cent of those holidaying in Scotland."

Inverness hotel owner Tony Story, who runs the Kingsmills Hotel and Ness Walk, said: "It's a disaster. We're under the cosh enough as it is.

"I know it's not something that will happen in the next 10 minutes but it's important people understand this puts more pressure on everything.

"The fact it looks likely to be a percentage, rather than a fixed quantity doesn't help either. People were saying before, it's just £1, why not make it £2? At the end of the day, it will be a disincentive."

Do you want to respond to this article? If so, click here to submit your thoughts and they may be published in print.

This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies - Learn More