National Discussion on Tourist Tax
Second Round Table Discussion, Glasgow
Wednesday 28th November 2018
Derek Mackay MSP, Cabinet Secretary for Finance, Economy and Fair Work
Jonathan Pryce, Director for Culture, Tourism and Major Events, Scottish Government
Bettina Sizeland, Deputy Director, Tourism & Major Events, Scottish Government
Kevin Brady, Senior Economist, Directorate for the Chief Economist, Scottish Government
Kay Barclay, Principal Research Officer, Scottish Government
Mairi Longmuir, Economic Adviser, Directorate for the Chief Economist, Scottish Government
Jonathan Ferrier, Tourism Team, Scottish Government
Richard Walsh, Tourism Team, Scottish Government
Sarah Simpson, Tourism Team, Scottish Government
Marie Lorimer, Public Policy Director, Airbnb
Craig Wilson, Economic Growth Officer (Tourism), Argyll and Bute Council
Fiona Campbell, Chief Executive, Association of Scottish Self Caterers
Val Russell, Chief Executive, Ayrshire Chamber of Commerce
Jeannette Wilson, Policy Director, British Homes & Holiday Parks Association
Judy Rae, Chair, Business Tourism for Scotland
Chris Young, Chartered Institute of Taxation
Alistair Dobson, COIG Initiative (North Ayrshire)
Malcolm Simpson, COIG Initiative (North Ayrshire)
Mari Tunby, Policy Director, CBI Scotland
Don Peebles, Chief Executive, Chartered Institute of Public Finance and Accountancy
Lauren Bruce, Chief Officer for Local Government Finance, CoSLA
Gillian Fyffe, Policy Manager, CoSLA
Tracey Martin, Economic Development Officer, Falkirk Council
Barry McCullough, Senior Policy Advisor, FSB Scotland
James Withers, Chief Executive, Food and Drink Scotland
Hugh Sheridan, Moffat Centre, Glasgow Caledonian University
Marina Martinolli, Moffat Centre, Glasgow Caledonian University
Stuart Patrick, Chief Executive, Glasgow Chamber of Commerce
Duncan Dornan, Head of Museums and Collections, Glasgow Life
Tom Rice, Head of Marketing Communications, Glasgow Life
Annique Armstrong, Glasgow Tourism and Visitor Plan, Glasgow Life (Conventions)
Janice Fisher, Greater Glasgow Hotels Association
Jamie Stevens, Greater Glasgow Hotels Association
Andy Rodger, Chair, Love Loch Lomond
Karen Yeomans, Executive Director (Economy & Communities), North Ayrshire Council
Peter Duthie, Chief Executive, SEC
Marc Crothall, CEO, Scottish Tourism Alliance
Calum Ross, UK Hospitality Board North
Willie MacLeod, Executive Director Scotland, UK Hospitality
Mark MacVey, Chair, UKInbound
Linda Johnston, Visit Arran Director, Visit Arran
Shelagh Gilmore, Visit Arran Executive Director, Visit Arran
Malcolm Roughead, Chief Executive, VisitScotland
Anna Miller, Head of Tourism, Highlands & Islands Enterprise
Danny Cusick, Director Food and Drink, Tourism & Textiles, Scottish Enterprise
1. The Cabinet Secretary opened the discussion event, which was the second in a series of events in support of the national discussion. This event was also a national-level event. 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 not seeking to consult on a discrete policy proposal. The national discussion events were an opportunity to discuss the evidence and views associated with Tourism Tax, marshalled under the four themes from the Scottish Government discussion paper.
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.
4. The Cabinet Secretary stressed that the Scottish Government was focused on supporting business in Scotland and on delivering sustainable economic growth. The Scottish Government was already spending significant funds, right across Scotland, on infrastructure (physical and digital) to support broader economic growth, not just within the visitor economy. Financial support to the visitor economy continued to be an important portion of the Scottish Government’s expenditure, including the latest commitment to maintain the cap on NDR increases.
5. He invited Kevin Brady to speak briefly to the SG Discussion Paper.
Scottish Government Tourism Tax Discussion Paper
6. 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.
7. 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.
8. The discussion paper also set out four broad themes, with a number of supporting questions, to help guide the 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.
CoSLA Position on a Transient Visitor Tax
9. The Cabinet Secretary asked Lauren Bruce to give an overview of CoSLA’s position with regard to tourism taxes.
10. CoSLA’s position on a Transient Visitor Tax (TVT) was set out in their discussion paper, which was published in June 2018 and had support from all 32 local authorities, based on support for discretionary tax powers in general.
11. The position articulated in CoSLA’s paper is that local authorities should be empowered with the discretion to introduce a TVT if the local circumstances were right and in full consultation with stakeholders within their local area. CoSLA shared recognition of importance of tourism; however, issue was that costs of supporting tourist infrastructure fall on taxpayers. Use of TVT would be in response to local circumstances and needs, and enabling Local Authorities to access levers to support and address pressures that differ across Scotland.
12. There was no shared local authority view around hypothecation of revenues. However, local authorities would see TVT as additional revenue that would be used to address the pressures of tourism and not to subsidise core budgets.
What Would the Reasons Be for Introducing a Transient Visitor Tax?
13. In general discussion, the following points were noted:
- The discussion events and discussion paper were welcomed, with the discussion paper being viewed as objective and even handed;
- Industry representatives acknowledged that they disagreed with proposals for further tourist taxes, particularly in light of current VAT rates, existing tax take, reliance on the domestic market, and uncertainties around the impact of Brexit. A key concern was around reduced competitiveness as a result of having to increase prices.
- The majority of EU countries who operate tourist taxes have notably lower rates of VAT on accommodation than the UK.
- Industry representatives highlighted that opposition was not limited to the accommodation sector, though non-accommodation businesses views were not uniform. However, member surveys tended to indicate majority opposition to tax proposals.
- Industry representatives highlighted the tourism industry’s existing contribution to tax revenues through other forms of taxation, and initial economic impact analysis by UK Hospitality suggesting that a £2 per room per night tourist tax in Edinburgh could result in a £75 million reduction in visitor expenditure.
- Industry representatives also expressed concern that debates on tourist taxes were moving too quickly to consider practicalities of delivery, before a decision on the principle of whether to introduce a tourist tax had been established.
- Attendees commented that it was important to view tax in the round, rather than focus on additional taxes in isolation. There were questions around how tourist taxes might interact with local discretionary fees, and whether local authorities were aware of this.
- Some attendees highlighted a potential risk that operation of tourist taxes in some areas, without broader redistribution, could heighten disparities between established tourist destinations, and those looking to develop their tourism offer. The question of how to distribute and share benefits from increased visitor numbers around Scotland was also raised.
- Attendees highlighted the potential risk of negative messages to visitors arising from a new tax, particularly if Scotland or the UK were perceived as being ‘less-welcoming’ after Brexit. Attendees suggested it would be desirable if Scotland could counter the more negative stance of the rest of the UK in the Brexit process. Scotland is Now and Scotland the Brand were identified as important initiatives that aim to attract people to Scotland.
- It was raised that a number of smaller businesses would not be aware of the debate and issues around tourist taxes, both for and against.
- Attendees highlighted that the discussion paper had identified that limited evidence was available on the potential impact and benefits of tourist taxes in a Scottish context. There was a need for greater empirical evidence on these, and on the potential revenues that could be raised through this route.
- Industry representatives raised the question of why tourist taxes should be used to fund general infrastructure investment, particularly when industries also using infrastructure such as roads would not be subject to tax. However, other attendees highlighted that such infrastructure can form an important part of visitors perceptions and experiences of different parts of Scotland, which contribute to positive impression of areas, and that funding for these were under pressure.
- Industry representatives raised questions over the focus on raising taxes on overnight visitors, rather than day visitors, and also suggested that introducing a tourist tax could create perceptions of seeking to tax successful performance.
What Would a Well-Designed and Operated Transient Visitor Tax Look Like?
14. In general discussion, the following points were noted:
- In terms of good practice, some attendees emphasised the importance of adopting a collegiate approach in this area, particularly in light of the potentially divisive nature of the issue. Some attendees also highlighted the lessons that could be learned lessons from initiatives such as Business Improvement Districts. The importance of those on whom tax is levied being able to influence decisions around use of funds was raised.
- Some industry representatives raised the importance of taking a holistic view of tourism funding, and of potentially reviewing long-standing business support measures and policy commitments.
- In terms of implementation and delivery, some attendees advised that international experience suggested the importance of definitions of tax, and of clear communication and messaging of taxes to customers. Lisbon and Porto were held up as good examples of international best practice.
- Some industry representatives suggested that introduction of a tax would create potential for competition across local authority boundaries, and between Scotland and other cities in the UK, potentially displacing visitor spend and activity. It was suggested that the current environment for operators was difficult, particularly in terms of recruiting and retaining staff and attracting visitors.
- Some attendees suggested that tourists, particularly from outwith Scotland, would not be aware of local authority boundaries, which emphasised the importance of consistency of messaging around taxation, and the importance of understand best practice in this regard.
- Industry representatives also raised questions regarding how different categories of accommodation providers would be treated under a tourist tax, emphasising the importance of ensuring a level playing field between accommodation providers. Questions were also raised regarding potential exemptions for different categories of overnight visitors, particularly business travellers, and over tax treatment of different leisure / tourism activities (particularly those catering for overnight and day visitor markets).
15. The Cabinet Secretary invited Malcolm Roughead, Chief Executive of VisitScotland, to offer some observations on the discussion. These included the importance of continuing to stimulate sustainable growth in Scotland’s tourism sector; recent successes that were creating benefits, such as establishment of direct flight routes between Edinburgh and Hainan; and the importance of considering decisions in the light of supporting the continued success of the sector.
16. The Cabinet Secretary thanked attendees for their contribution to the discussion, and invited attendees to provide written comments or evidence to the Scottish Government’s national discussion should they wish to do so.