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 F

National Discussion on Tourist Tax
Sixth Round Table Discussion, Inverness
Monday 14th January 2019


Kate Forbes MSP, Minister for Public Finance and Digital Economy

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

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

Robin Haynes, Head of Council Tax Reform, Scottish Government

Richard Walsh, Tourism Team, Scottish Government

Cllr Gordon Adam, Highland Council

Cllr. Maxine Smith. Highland Council

Cllr. Bill Lobban, Convener, Highland Council

Cllr Bill Boyd, Highland Council

Cllr. Adam McVey, Leader, City of Edinburgh Council (via ‘phone)

Calum Iain Maciver, Director of Development, Comhairle nan Eilan Siar

Frasier Grieve, Regional Director, HI, SCDI

John Shearer, President, Scottish Licensed Trade Association

Gareth Pashke, Cairn Hotel

John Palmer, Chair, Black Isle Tourism

Anika Schulz, Visit Nairn

Jim Grant, (Planning and Economic Development) Moray Council

Colin Simpson, Principal Tourism and Film Officer, Highland Council

Andrew MacKay, Director, Caithness Chamber of Commerce

Alastair Danter, Project Manager, Skye Connect

Anne Gracie, Director, Skye Connect

Clare Winskill, Director, Skye Connect

Angus Noble

Benjamin Carey, Carey Tourism

Catherine Bunn, Director, Highland Campervans

Emmanuel Moine, Chairperson, Inverness Hotels Association

Craig Ewan, General Manager, Kingsmills Hotels

Willie Macleod, Executive Director Scotland UKHospitality

Calum Ross, UKHospitality Board North

Marc Crothall, CEO, Scottish Tourism Alliance

Grant Moir, CEO Cairngorms National Park Authority

Hamish Fraser, Area Leader, Federation of Small Businesses

David Richardson, H&I Development Manager, Federation of Small Businesses

William Cameron, National Council of Rural Advisers

Graeme Ambrose, CEO, VisitInverness/Loch Ness TBID

Frazer Coupland, CEO, Lochaber Chamber of Commerce

Craig Mills, CEO NC500

Gary Williamson, MD, Williamson Foodstuff

Lara MacKay, Business Support Manager, Moray Chamber of Commerce

Natasha Hutchinson, VisitWesterRoss

Laurie Piper, Tourism Operations Manager, Moray Speyside DMO

Mike Smith, BID Manager, Inverness City Centre BID

Jenny Sime, Business Development Manager, Cairngorms Business Partnership


Anna Miller, HIE

Introductory Remarks

1. The Minister opened the discussion event, which was the sixth and final event in a series to support the national discussion. The Cabinet Secretary highlighted that tourist taxes are a complex topic and tourism’s role as a national growth sector, and the requirement for primary legislation should any tourism tax powers be devolved to local authorities, necessitated national consideration.

2. The Scottish Government was not seeking to consult on a discrete policy proposal through the national discussion. 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. The Minister noted that CoSLA had published their Transient Visitor Tax paper in June 2018, which called for greater devolution of financial control to local authorities: amongst these was a suggested power to levy a Transient Visitor Tax.

4. 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.

5. The Minister then invited Kevin Brady to provide an overview of the Scottish Government’s 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 tourism 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 tourism 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 four themes, with the supporting questions within them acting as prompts for discussion.

General Discussion

9. The Minister invited the Elected Members attending the discussion event to give their thoughts on the topic. The following points were noted:

  • Members attending were broadly supportive of the idea of a tourist tax, on grounds of their Local Authorities having limited funds available to address infrastructure needs to support tourism development and the continued success of tourism in areas like the Highlands. The importance of this was reflected by emerging messages around visitor ‘hotspots’ and inadequate facilities.
  • Specifically hypothecated revenue streams, such as from a tourist tax, could be one route to addressing this gap.
  • Members were concerned that existing funding for tourism support and core infrastructure expected by visitors was difficult to sustain, particularly given the need to fund Local Authorities’ statutory obligations.
  • Members welcomed existing initiatives, such as the Rural Tourism Infrastructure Fund, but argued that funding needs exceeded those available through RTIF.
  • A tourist tax was viewed as a means and opportunity by which Local Authorities could have greater autonomy to address local priorities for investment and growth of tourism, rather than rely solely on funding from central government.
  • A tourist tax could also be an important tool for ensuring continued public support for tourism development in areas experiencing high volumes of visitors.

10. There then followed a general discussion around the questions raised in the discussion document, and around the broader issue of tourist taxes.

What would the reasons be for introducing a transient visitor tax?

11. In general discussion, the following points were noted:

  • Industry representatives highlighted their opposition to potential introduction of a tax, on grounds of the additional challenge it would create for profitability and competiveness when combined with existing challenges such as increases in Non-domestic Rates and the National Living Wage.
  • Industry representatives recognised Local Authorities’ funding challenges, but highlighted that a tourist tax would represent an additional cost to business. Industry representatives raised questions over the rationale underpinning a tax; its alignment with existing policies such as proposed reductions in Air Departure Tax; the UK’s high rate of VAT on accommodation in comparison to other EU Member States; potential alternative approaches for supporting investment, such as reform of the Small Business Bonus Scheme; and the potential negative impact on visitor expenditure (estimated at around £200 million by UK Hospitality).
  • Industry representatives also questioned the timing of discussions, given challenges and uncertainties associated with Brexit, and potential increases in staffing costs that could arise should it become difficult to recruit staff from EU member states.
  • Industry representatives emphasised the different tourism challenges between areas like Edinburgh and the Highlands, and the differences in these areas’ tourism sectors. The potential fragility of tourism across the Highlands was raised.
  • Industry representatives questioned the extent to which costs of compliance with a tourism tax would be consistent with the Adam Smith principles of taxation, and the need for a level playing field with smaller operators and providers operating through collaborative economy platforms.
  • Some attendees highlighted the success of visitor payback schemes, but emphasised that discussions to date around tourist taxes were not consistent with these ideas. The EU experience of successful implementation was highlighted, where revenues were raised, spent and administered locally, with local accountability. Some attendees observed that such initiatives would only operate successfully if local business organisations were able to influence and direct expenditure of revenues, in a manner similar to that of the BID approach. They also observed that Local Authorities currently did not have the systems that would be required to collect revenues and operate initiatives of this sort.
  • Industry representatives highlighted the reliance of the Scottish tourism sector on domestic visitors; that a tax on accommodation would not impact on day visitors, who represented an important source of pressure in tourism areas; that a tax would represent an additional cost to business; and a desire to consider alternative approaches for supporting tourism investment. Industry representatives also gave examples of the existing scale of tax revenue contributed by individual accommodation businesses.
  • Industry representatives highlighted existing cost pressures facing the industry; and argued that they were experiencing an uneven playing field in terms of regulation with providers operating through collaborative economy platforms. The potential for differences in Local Authorities’ approaches to tourist taxes to generate changes in visitor behaviour was raised, along with questions on whether a tax would impact on specific cases, such as motorhomes.
  • Some industry representatives argued that the tourism sector in the Highlands was centralised (e.g. in areas like Inverness and Skye) and highlighted the potential fragility of areas outside these. Challenges around staffing costs, taxation and business turnover were raised, with some attendees emphasising the importance of taking a holistic view of business taxation.

What would a well-designed and operated transient visitor tax look like?

  • Some Local Authority representatives argued for a discretionary local tax, and suggested that the least complex way to operate such a tax would be for revenues to be transferred to and spent by Local Authorities on strategic investments, with industry stakeholders influencing and advising around decisions on these.
  • Some attendees highlighted the approach adopted in BIDs as a potential model for operation of a tourist tax, in terms of revenue collection, enforcement and expenditure decision-making arrangements. However, others argued that revenues raised through BIDs were required to be spent on activities additional to Local Authorities’ existing functions and responsibilities.
  • Some Local Authority representatives highlighted that tourist taxes could represent a significant revenue source when compared against existing Local Authority capital budgets. They also argued that while there would be challenges around collection approaches, these were not insurmountable. Differences in infrastructure needs across Local Authorities, resulting from their different markets and visitor bases, were also emphasised.
  • Some Local Authority representatives also highlighted that the Islands Scotland Act 2018 would have implications for this debate, particularly around Island-proofing policy.
  • Some attendees highlighted the different challenges and degree of ease of accessing funds for capital investment, which was observed as being less difficult than securing funding for maintenance of existing capital assets. Attendees also highlighted the importance questions around how to ensure that investment was aligned with local priorities, and how to raise funds for investment sustainably over time.
  • Some attendees suggested that a model similar to a BID approach was preferable, where revenues were raised and administered locally, and with clear transparency between what revenues were raised and what they were spent on. However, other attendees advised of difficulties in hypothecating revenues raised by specific taxes for specific purposes.
  • Some attendees highlighted alternative options for raising revenue, including locally-based voluntary measures.
  • Industry representatives raised questions about who would collect and enforce a tourist tax, and the costs associated with each of these. It was suggested that an additional tax would require additional collection and enforcement mechanisms.
  • Some Local Authority representatives advised that issues around administration, collection and enforcement were in early stages of development, but were supportive in principle of ideas around revenues being raised and spent in local areas (with input from stakeholders).
  • Some attendees suggested that successful operation would require a positive message for visitors, identifying the contribution their levy would make to the area. If the policy was perceived as simply a tax on visitors, it could potentially discourage or disillusion visitors.
  • Some attendees raised messages from international experience around the importance of transparency around raising tax, and of not ‘hiding’ it from visitors, in order to increase buy-in and acceptance of a tax.
  • What positive and negative impacts could a transient visitor tax have?
  • Some attendees had differing views about potential behavioural responses to the introduction of a tax, with some expressing concerns, and others expressing scepticism about behavioural responses to the scale of tax being discussed in areas like Edinburgh or the Highlands.
  • Some attendees identified international experience of difficulties with tourist taxes for different categories of visitors, with experience of business travellers in Frankfurt cited as an example. It was also suggested that there was already a perception of Scotland being a high cost destination.
  • Some Local Authority representatives expressed scepticism that the scale of tax proposed in areas like Edinburgh would affect the fundamentals of well-established areas as tourist destinations, or generate a significant behavioural response on the part of most tourists.
  • Industry representatives expressed concern over potential misperceptions around accommodation providers’ profitability, highlighting variability in achievable room rates, set against year-round cost bases.
  • Industry representatives also highlighted existing evidence from sources such as FSB member surveys, which indicated evidence of strong opposition to a tourist tax among members.

Concluding Remarks

12. The Minister gave an overview of issues raised within the discussion. These included questions around potential behavioural responses among tourists; issues around administration and collection of taxes; issues around VAT rates applied to accommodation, which although reserved to the UK Government, the Scottish Government was aware of whilst also being mindful of the potential future impact on Scottish Government revenues; and questions around additional evidence needs.

13. The Minister thanked attendees for their contribution to the discussion. The Minister reminded attendees that a high level readout of the session would be prepared by officials and published and that they were also invited to provide written contributions should they wish to do so. The Minister also advised attendees that they would be advised of a closing date for the national discussion in the coming days.

Tourism Team
January 2019



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