Tourism tax: messages from the national discussion

High-level summary of the messages that emerged from our national discussion on tourist taxes, and summaries from roundtable discussions.

Annex A

National Discussion on Tourist Tax
First Round Table Discussion, Perth
Friday 23rd November 2018


Fiona Hyslop MSP, Cabinet Secretary for Culture, Tourism and External Affairs

Bettina Sizeland, Deputy Director, Tourism & Major Events, Scottish Government

Kevin Brady, Senior Economist, Directorate for the Chief Economist, Scottish Government

Richard Walsh, Tourism Team, Scottish Government

Sarah Simpson, Tourism Team, Scottish Government

Mhairi Clarke, Comms Director, Scottish Tourism Alliance

Jennifer Carswell, City Development, Dundee City Council

Ben Mardall, Chair, WildScotland

Steve Mills, Service Lead Finance, Angus Council

Alastair Reid, Team Manager Economic Development & Protective Services, Aberdeenshire Council

Alan Graham, Business Development, Perth and Kinross Council

David Groundwater, Development Manager, Federation of Small Businesses Scotland

Moira Henderson MBE, Chair of Fife Tourism Partnership - Chairs Group

Russell Imrie, Dunfermline Hoteliers Group

Stephen Leckie, Chair, Scottish Tourism Alliance

Sandra Montador-Stewart, Service Manager Economy, Tourism and Town Centres, Fife Council
Iain Smith, Head of Corporate Relations, Diageo

David Smythe, Chair, Perthshire Tourism Partnership

Introductory Remarks

1. The Cabinet Secretary welcomed attendees to the discussion event, which would be the first in a series of events across Scotland. The Cabinet Secretary highlighted that tourist taxes are a complex topic, and tourism’s role as a national growth sector, and the requirement for legislation should any powers be devolved, necessitated national consideration.

2. Through the national discussion, the Scottish Government was seeking to enable stakeholders to present their views and evidence on the issues around tourist taxes. The national discussion was not seeking to consult on a discrete policy proposal; instead, the process was an opportunity for stakeholders to come together to establish a shared understanding of positions and available evidence on this topic.

3. As well as the discussion participants, other stakeholders in the discussion would be able to view the discussion paper online and email evidence into a dedicated email address. The Scottish Government would look to publish a high level readout of the national discussion events, along with evidence provided by stakeholders.

Scottish Government Tourism Tax Discussion Paper

4. Kevin Brady provided an overview of the discussion paper. It was emphasised that the purpose of the discussion paper was to provide evidence to inform the national discussion; it was not intended to present a Scottish Government policy position, or advance a case ‘for’ or ‘against’ a tourist tax.

5. The discussion paper set out the Scottish Government’s general economic policy context, and the principles influencing Scottish Government thinking on tax (the ‘Adam Smith principles’); evidence on tourism in Scotland; discussion around taxes on tourism businesses, and occupancy taxes (aka tourist taxes, or transient visitor taxes) in other countries; and issues raised from international evidence and experience that could be relevant to the discussion. It also highlighted key messages from recent EU work on tourism taxation, which emphasised the importance of balancing revenue considerations with maintaining industry competitiveness.

6. The discussion paper also set out four broad themes, with a number of supporting questions, to guide discussion. These were:

  • What Would the Reasons Be for Introducing a Transient Visitor Tax?
  • What Would a Well-Designed and Operated Transient Visitor Tax Look Like?
  • What Positive and Negative Impacts Could a Transient Visitor Tax Have?
  • How could a transient visitor tax be used, and how can revenues be distributed fairly?

The discussion event would be broadly structured around these themes, with the supporting questions within them acting as prompts for discussion.

7. The Scottish Government indicated that it was considering further research on this issue, but would look for the scope to be informed by the national discussion.

What Would the Reasons Be for Introducing a Transient Visitor Tax?

8. In discussion, the following points were made:

  • Significant investors in tourism attractions, such as the whisky industry, were keen to see a thriving tourism sector in Scotland. New taxes were potentially a risk to this, but impact would depend on how revenues were used and invested, and also ensuring that investment in infrastructure was joined up, and taking a medium and long term view;
  • Tourism industry representatives highlighted that visitors are taxed at each stage on the ‘customer journey’, and expressed the view that the UK sector is already at a competitive disadvantage when it came to taxation.
  • Industry representatives argued that further rigorous research in this area was essential. Previous UK-level analysis on price elasticity of demand for tourism was highlighted, indicating that tourists were price-sensitive; current data from STR showing annual reductions in hotel occupancy in Edinburgh and Aberdeen were also referenced, with increased competition from collaborative economy platforms being a contributing factor.
  • Industry representatives also highlighted the challenge of negative messaging around tourism, highlighting media stories that ‘Scotland was full’, and the risk of signalling to visitors that they were unwelcome, particularly in the context of negative perceptions created by Brexit.
  • Industry representatives highlighted consistent feedback from members about the undesirability of new or additional taxes, but also the differing regional priorities for tourism investment (e.g. marketing in Aberdeen, cleaner streets in Edinburgh);
  • Visitor attraction representatives highlighted recent data, indicating constrained visitor expenditure in participating attractions;
  • In addition to the Adam Smith principles, Local Authority officers highlighted the importance of taxes not distorting the market. Ensuring and delivering hypothecation of revenues would be a significant issue. Local Authorities highlighted importance of maintaining investor confidence, and encouraging visitors to visit a range of areas across Scotland, to spread the benefits of tourism success more widely.
  • The importance of consistency of any scheme across Scotland, for example in processes related to collection was emphasised;
  • It was highlighted that several areas operated voluntary schemes for improving facilities (such as the Big Tree Levy), with one uncertainty being how tourist taxes might interact with or influence contributions towards these;
  • There were also questions around coverage of potential taxes, with attendees highlighting that tourist taxes may not be an appropriate solution to issues such as wild camping, and querying whether taxes would be applicable to different groups of visitors, such as leisure or business travellers, with different spending profiles and footprints.

What Would a Well-Designed and Operated Transient Visitor Tax Look Like?

9. In discussion, the following points were noted:

  • Industry representatives highlighted that there was uncertainty around the size and scope of the tax base, as it was unclear how many accommodation businesses and premises were currently active;
  • There were concerns that the perception was that tourist taxes would only be levied on overseas visitors, when the majority of overnight visitors in Scotland were from elsewhere in Scotland or the UK;
  • Industry representatives highlighted concerns around the costs of administration and collection on businesses, and that this had not yet been considered within the debate. For instance, implementation of a tax and collection would require alterations to accommodation providers existing systems. Overall prices including tourist taxes would need to be displayed at point of sale, although the interaction between taxes and VAT was unclear at present;
  • It was indicated that current local authority collection systems (e.g. for council tax or non-domestic rates) may not be appropriate for collection of a tourist tax, while use of exemptions (e.g. for children, business travellers) would introduce complexities into collection and enforcement. Issues relating to powers over non-compliance, and powers to remedy these, would also need consideration.
  • Industry representatives highlighted that the collection system should include visitors using digital platform accommodation providers such as Airbnb to ensure fairness and proportionality.

What Positive and Negative Impacts Could a Transient Visitor Tax Have?

10. In discussion, the following points were noted:

  • Current uncertainty, particularly around Brexit, meant that introduction of new taxes had to have a longer term view in mind;
  • Consumers’ price sensitivity was important to understand, and a potential gap in the evidence base;
  • Industry representatives indicated that the benefits of a tourist tax were unclear to the industry, that potential uses of funding were unclear, and that the tax was potentially distortionary.
  • Industry representatives also highlighted that there was a risk of undermining partnership and trust between local authorities and the tourism sector around support for the sector’s broader growth, potentially sending a signal around negative consequences of success and risk-taking;
  • Further data and evidence gaps included the understanding of the tourism and accommodation sector’s margins and profitability, as well as the broad rationale from local authorities underpinning proposals for a tourism tax.

Closing Remarks

11. The Cabinet Secretary highlighted several themes that had emerged during the discussion. These included the importance of developing shared investment priorities for tourism; evidence gaps and research needs; the importance of understanding the factors influencing profitability of accommodation providers, and the importance of maintaining positive perceptions among visitors of Scotland as a welcoming destination.

12. The Cabinet Secretary thanked attendees for their participation, reiterated that this event was the first of several discussion events, and that participants were invited to provide contributions in writing to the Scottish Government.

Tourism Team
November 2018



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