Cruise Ship Levy: consultation analysis

2. A potential cruise ship levy for local authorities

Chapter 2 presents views on giving Scottish local authorities the power to create a cruise ship levy. The consultation paper notes that while the proposal would give local authorities the ability to introduce a levy, it is not a nationwide levy, and local authorities can decide whether to introduce the levy and whether to implement it in all or some of their area.

Q1. Do you support giving local authorities the power to create a cruise ship levy in their area, if they wish to do so? Please provide the reasons for your answer.

Among those answering Q1, just over three fifths (62%) supported giving local authorities the power to create a cruise ship levy in their area, while one third (34%) opposed the proposal, and 5% were unsure. Support was higher among individuals who answered (73%) than organisations (39%). Among organisations, all local authority respondents supported the proposal, but it was opposed by 94% of harbours and ports and 92% of cruise industry respondents (see Appendix A).

Just over two thirds of respondents provided an open response at Q1. For ease of reading, the following analysis first presents reasons for supporting a cruise ship levy, followed by reasons cited by those who opposed the proposal, from most to least prevalent. In general, comments from individuals were more likely to express support, while those from organisations were more likely to include reasons for disagreement.

Support for a cruise ship levy

Mitigating the impact of cruise tourism on local communities

Many respondents left comments expressing support for a cruise ship levy. Of those, the most common response was that a levy could help mitigate the impact of cruise ship visits on local communities. These respondents felt that cruise ship passengers used local resources, such as roads, bins, public toilets and public transport, but did not contribute equally to the local economy. Others felt that cruise ship passengers could disrupt daily routines and businesses in affected communities.

“It is debatable how much benefit the ships actually bring the local community, given the passengers don't stay on the island and aren't allowed to take food and drink items on board with them, but they do cause a lot of problems for longer-term visitors. They should be taxed accordingly, and the money re-invested in the communities they visit.” - Individual

Improve infrastructure

More specifically, several respondents supported the proposal as they felt the revenue raised from a cruise ship levy could be used to help communities invest in and improve their local infrastructure. In particular, they felt it could be used to improve facilities used by cruise ship passengers when they come ashore, such as toilet facilities, waste collection and transport. Some expressed the view that revenue could also assist with the sustainable development of the infrastructure. More information about views on how revenue raised by a levy could be used is provided in the analysis of responses to Q8.

“The visiting cruise passengers create stresses in the local area. I live in Newhaven, where we will have more than 50 cruise ships this year. It’s great to see people, but not the shutdown of all local parking to allow buses and taxis to take over. Some investment in the local area from tourist tax e.g., remove litter around the harbour, tidy up the local streets and improve signage to local attractions, would be of benefit to the local community and to the visitors who want to visit the local area.” – Individual

Other themes in support

Some respondents agreed with the proposal as they felt it should be up to local authorities to determine whether they needed a levy. They felt that local authorities were best placed to understand the impact of cruise ship visits on their communities and how they could best remedy that impact through a levy.

Support for a cruise ship levy also came from some respondents who felt it was fair and necessary, given the legislation allowing local authorities to implement a visitor levy.

Some respondents cited concerns about the environmental impact of cruise ships as another reason for supporting a cruise ship levy. Highlands and Islands Enterprise also raised this issue, acknowledging the pressure placed on the area's ecosystem during tourist season and asking that any levy be structured to mitigate the impact on both the community and the environment.

“Yes, local authorities should have the power to introduce a cruise ship levy if they choose to do so. Cruise ships have a detrimental impact on local water quality and biodiversity, contributing to pollution and habitat disruption in sensitive marine environments. They also negatively affect the landscape and visual appeal of towns and cities, blocking waterfront views, creating noise pollution, and overwhelming historic and cultural areas with large influxes of short-term visitors. Despite the high number of passengers, cruise tourism often provides little economic benefit to local communities, as passengers tend to spend minimal time and money ashore, with many services provided onboard rather than by local businesses. A levy would help mitigate these impacts by generating revenue for environmental protection, infrastructure maintenance, and community improvements, ensuring that coastal and island communities do not bear the costs of cruise tourism without fair compensation.” - Individual

Two respondents noted that they supported the proposal because it would help facilitate relationships between cruise ship operators and local authorities. These respondents felt that cruise ship operators often worked more closely with ports and excursion operators and suggested that a more direct relationship with local authorities could improve experiences for both cruise ship passengers and community members.

Reasons against a cruise ship levy

Negative impacts on tourism

Many respondents were against the proposal, believing that a cruise ship levy could negatively impact tourism. These respondents felt that it could discourage cruise ship operators from visiting certain ports, particularly smaller ports, and reduce cruise tourism to Scotland generally if other European ports appeared to be more attractive destinations. Others noted that cruise tourism in Scotland was still new and developing, and that a new levy may deter further development.

“Scrabster Harbour Trust does not support giving local authorities the power to create a cruise ship levy. The Trust believes this would disproportionately impact peripheral and fragile regions such as the far north of Scotland. Our objections are based on the fragile nature of the tourism economy in the Highlands and Islands, the disproportionate burden a levy would impose on smaller ports, and international examples which demonstrate that such levies can reduce cruise ship calls and negatively affect local economies.” - Scrabster Harbour Trust

Negative financial impacts

In contrast to those who supported a levy, several respondents highlighted the economic benefit they felt cruise passengers bring to local economies, particularly those areas that may be hard for tourists to reach otherwise. Respondents cited negative impacts of introducing a levy, such as fewer cruise ships paying port and harbour dues, landing fees, and using local taxi services, tour guides, bus services and local shops. Others suggested the levy could negatively impact small, local businesses. A few respondents specifically mentioned the negative impact this could have on the whisky and spirit industry.

“A cruise ship levy could have a significant negative impact for Scotland and may reduce the widespread benefits that cruise brings to Scotland. This impact will be felt mostly by smaller communities in Scotland. Hospitality businesses in and around port areas and those in areas where passengers travel to will be impacted. Many of these businesses have worked to tap into this lucrative market and created jobs and invested for success.” - UKHospitality Scotland

“The cruise industry already supports the Scottish and UK economy through a variety of taxes and dues, including VAT on goods and services, light dues, and, for UK-based cruise lines, corporation tax, NI and business rates (/NDR). The ships pay fees to ports and local businesses which generate these taxes from the supply chain.” - Port of Cromarty Firth

Potential competition

Some felt that enabling local authorities to decide the rate of their levy could lead to an inconsistent approach to implementation and increased competition between local authorities, with lower levied areas becoming more desirable for cruise ship operators. Cruise Britain referred to this as “competitive distortion.”

“Allowing local authorities to introduce individual cruise ship levies would lead to fragmentation and confusion across Scotland. Cruise operators require clarity and consistency when planning itineraries. A patchwork of local charges would act as a deterrent to cruise operators, leading to reduced ship calls and reputational damage, risking severe unintended consequences for Scotland’s tourism economy.” - Forth Ports Limited

Other concerns

Some respondents also raised concerns that a levy on cruise ships lacked precedent, as they suggest that cruises are considered transportation for tax purposes, and there is no similar tax on any other form of transport.

At every consultation question, between a few and several respondents reiterated their opposition to introducing a cruise ship levy. This was more common among respondents from ports and harbours, the tourism industry and cruise ship operators. This group noted they did not think powers to set a cruise ship levy should be given to local authorities. In some cases, these respondents simply reiterated their opposition at subsequent questions about a potential levy, as they felt those questions were irrelevant given their overall views. Other respondents, however, provided detail and evidence to support their disagreement.

Other suggestions and considerations

Some respondents, including some who agreed with a cruise ship levy and others who disagreed, proposed alternate suggestions. The most prevalent, suggested by some, was a point of entry tax, which is explored in greater detail at Q18. Other suggestions have been included in the analysis of responses to Q2, which focused on this issue.

A few suggested other considerations, including, from most to least prevalent:

• There is a need to consider the impact of any cruise ship levy on UK-wide tourism.
• A suggestion to wait until the Visitor Levy comes into effect in certain local authorities, so its impact can be measured before introducing another levy.
• Calls for collaboration between local authorities if cruise ship passengers enter one local authority port and enjoy activities in another local authority. It was felt necessary to ensure that any levy is distributed between all local authorities visited, rather than just the point of disembarkation.
• Questions about the impact on cruises that start and end in Scottish ports which may be the most attractive to Scottish citizens.

Need more information

The need for further information about the impacts of cruise tourism and the potential levy was highlighted by some respondents who felt unable to comment on this question. Respondents requested further details on the purpose and goals of the proposed levy, the proposed costs and levy amounts, a more detailed cost-benefit analysis, an economic analysis of the cruise ship industry's response to a levy, and greater consideration of unintended consequences that could result from the levy. There were also calls for a complete Business and Regulatory Impact Assessment (BRIA) rather than the existing Partial BRIA. The Federation of Small Businesses emphasised this point in its response.

The request for additional information was repeated at every open question by between some and several respondents, depending on the question. For example, at Q1, there were a few representatives of businesses related to tourism, and at Q2, several respondents, predominantly those representing the cruise ship business and harbours and ports, felt unable to answer without more detail.

The Institute of Chartered Accountants of Scotland and the Chartered Institute of Taxation noted the importance of clarity around the purpose of the levy and a clear national framework for tax purposes across the different local authorities.

“Any tax implications (such as the design and structure of the levy itself (including the definition of who the taxable person is, e.g. passengers, the shipping company, the booking agent/platform, etc.) as well as the interaction of the levy with other taxes such as VAT and complexity/administrative burden) should be fully examined; the logic, purpose and outcomes questioned/debated.” - Institute of Chartered Accountants of Scotland

Confusion around the purpose of the levy was encapsulated in VisitScotland’s response. After attending roundtables and reading the consultation paper, it noted that it had identified four different rationales for the levy, and provided charts with aims and outcomes, which can be viewed in full in their published response.

“Different understandings raised in relation to the purpose have included: a) sustaining infrastructure for visitors in-destination, cruise passengers at ports, and improving the visitor experience; b) a natural extension of the visitor levy and the equity of including cruise passengers; c) encouraging lower emission vessels; d) increasing the ability of business and communities to generate benefits from cruise. Each of the above purposes for a levy would require a different approach. Without clarify on the overarching purpose of the cruise ship levy, we believe it is not possible to answer the specific questions posed.” – VisitScotland

Q2. What alternatives (if any) do you think would achieve the same goals as a cruise ship levy? Please provide details of any alternative option(s).

Just over half of respondents answered Q2. The most prevalent themes in comments were that no alternative option would achieve the same goals, discussion of a ‘point of entry’ levy, and the need to work more collaboratively with the cruise ship industry.

No alternative option

Many respondents expressed the view that there was no alternative to a cruise ship levy that would achieve the same goals. Most of these respondents left little or no detail to explain why they felt this was the case. A few who disagreed with the proposal at Q1 also stated there was no alternative option, without further explanation. For those few, while it is clear they are against the cruise ship levy as outlined in the consultation paper, without further detail we can only infer that their response at Q2 indicates they are also against any other options.

Point of entry levy

Some respondents suggested giving local authorities the power to implement a point of entry levy as an alternative approach. This is examined in more detail at Q18.

Partnership and collaborative working

Suggestions for local authorities to work more closely with the cruise ship industry to achieve some of the goals and aims of the proposed levy were recommended by some respondents. Suggestions included working with tour operators to achieve balanced visitor numbers, collaborating with cruise ship operators to invest in tourism infrastructure, and working with ports to apply for and achieve grants for maintenance and updates. Others suggested establishing partnerships with the Scottish Government and across local authorities to help facilitate conversations and share aims for cruise tourism in Scotland.

“Rather than imposing a punitive measure that could discourage cruise tourism, we would support a collaborative and incentive-based model. Alternatives might include voluntary visitor contributions co-ordinated with local tourism businesses; direct investment in rural tourism infrastructure from national government; [or] a centrally administered support fund for small ports with evidence-based need. These approaches would strengthen, rather than risk weakening, Scotland’s rural visitor economy.” - 8 Doors Distillery

A few suggested that the Scottish Government should collaborate with local authorities to create a budgetary or fiscal framework to assist with local infrastructure problems. Greater support from other sources, including central Scottish Government funding, was suggested by a few respondents.

Other suggested charges

Several respondents suggested other charges to consider as an alternative to a cruise ship levy. A few recommended that local authorities be given powers to implement a levy for any tourist vehicle, including caravans, campervans, and motorhomes. A small number recommended increasing port fees or levies for port activities, such as road congestion fees or parking fees for bus tours or delivery trucks.

Other less common suggestions included, from most to least prevalent:

• A property tax on landlords, holiday let owners and those who own a second home.
• A levy on trips or activities undertaken by cruise passengers.
• A nationally controlled visitor tax.
• A voluntary donation to be paid by cruise ship passengers upon disembarking.
• Mandated community contribution by vessels.

Other suggestions

Other points were raised by several respondents, though these did not always offer alternative approaches to a cruise ship levy. These included, from most to least prevalent:

• Placing greater emphasis on environmental regulations, such as emissions caps or a green tariff, which is being explored by Port of Aberdeen.
• Introducing reservation systems or limited licenses for tourist activity during peak times. An example given of this was the reservation systems in US national parks.
• Greater education of tourists about responsible behaviours when visiting localities.
• Encouraging local businesses to adjust their hours to accommodate cruise ship disembarkations.
• Transfer of ports and harbours to local authorities or allowing local authorities to claim port fees for cruise ships.
• Banning cruise ships entirely.

“It is not clear what goal the cruise levy is trying to achieve, other than as a blunt revenue generator. Given the high costs of operating in this region already, it is most likely that the levy will just reduce demand and will generate less income than might be hoped for. Far better to focus on developing managed tourism and make sure that the benefits from cruise ship calls are invested locally.” - Ambassador Cruise Line

As noted at Q1, several respondents at Q2 reiterated that they were against the levy in principle, and several others noted that they felt more information was needed before they could answer this question.