The introduction of a visitor levy in Scotland is a contentious issue, and for good reason. After grappling with the costs and red tape associated with short-term let regulations, small businesses now face the prospect of yet another administrative hurdle. This time, it’s a levy that threatens not just the financial stability of operators, but also the affordability of domestic tourism for Scots.
While aimed at generating revenue to support local infrastructure, the levy runs the risk of undermining Scotland’s tourism competitiveness. Consumers, especially those sensitive to price increases, may simply opt for cheaper alternatives elsewhere in the UK or even abroad. At a time when local businesses are still recovering from economic disruptions, the levy feels like an added strain rather than a necessary solution.
Tourism is undeniably a crucial driver for Scotland’s economy, contributing £6 billion annually and supporting 229,000 jobs, which accounts for 8.5% of total employment. Often, discussions around tourism focus on concerns like overtourism or overcrowding in key areas such as Edinburgh, but we must not lose sight of the vital role this sector plays in sustaining local economies and communities.
Yet, the burden of this new levy won’t be spread evenly across the sector. Small businesses like B&Bs and self-catering accommodations will bear the brunt of the administrative workload, while larger entities, such as cruise operators, are notably excluded from the legislation. This inequity exacerbates the financial and operational challenges for small operators, many of whom are already struggling to stay afloat.
Supporters of the visitor levy argue that it’s a common practice in many tourist destinations around the world. However, there’s a significant difference in context. Most European countries that impose a visitor tax do not also charge 20% VAT on accommodation, as Scotland does. In 25 EU nations, a reduced VAT rate is applied to accommodation, meaning the overall burden on tourists is much lower than what is being proposed here. With the UK ranking 113th out of 117 countries in the World Economic Forum’s tourism price competitiveness index, Scotland is already at a disadvantage. Introducing an additional tax will only push it further down the list, driving cost-sensitive visitors to more affordable destinations.
Moreover, it’s not just foreign tourists who will feel the pinch. Ordinary Scots, visiting parts of their own country, will also be subject to this “tourist tax.” Many of these individuals already contribute to local services through existing taxation, making the levy feel somewhat unjust in its application.
There is a need for thoughtful, balanced implementation. Local councils, particularly Edinburgh, are leading the charge on the visitor levy, but they must approach it with extreme caution. Engaging with the business community, conducting full economic impact assessments, and ensuring transparency in consultations will be key to mitigating any negative consequences. The funds raised through the levy should be strictly allocated to tourist infrastructure projects, ensuring that any benefit is directly felt within the sector.
A particularly concerning development is the suggestion of a higher levy than the 5% initially proposed in Edinburgh’s draft scheme. Setting the rate too high risks tipping the balance, potentially causing significant harm to Scotland’s reputation as a top-tier destination. Scotland’s tourism sector thrives on its affordability and accessibility to a wide range of visitors. Raising costs could drive away both domestic and international tourists, leaving small businesses vulnerable to a downturn.
One small business owner illustrated the precarious nature of their situation. After raising rates to cover surging energy costs, they crossed the VAT threshold, which necessitated even further price hikes. While this led to an influx of American visitors, it came at the cost of losing 80% of their Scottish customer base. If international visitors were to decline, their business would struggle to stay afloat. This case study reflects the risks that come with overpricing the market, and the visitor levy only adds to those pressures.
Ultimately, the visitor levy is coming, whether we like it or not. But it’s imperative that we work closely with local and national governments to ensure that its introduction does not inflict lasting damage on Scotland’s tourism industry. Reasonable rates, thoughtful implementation, and careful attention to potential unintended consequences are vital. Failure to take these steps could result in a levy that erodes the very industry it is intended to support.
Chief Executive, Association of Scotland’s Self-Caterers