Tourists: to tax or not to tax? That is the question…and what to call it is another!

14th of August, 2018 | Posted in Editor's Picks, Hotel News Email Article | Print Article

The decade-old tourist tax debate has one thing in common with athlete’s foot – it doesn’t seem to want to go away, despite being about as welcome as an itchy rash to many in our industry. Jason Caddy reports.

It’s also got various guises. Some call it a ‘Bed Tax’, others a Tourist Visitor Levy – there’s also a Transient Visitor Tax. Nevertheless, it seems likely that hoteliers will face a tax of some description despite an emphatic denial from the Scottish Government. Derek Mackay, Cabinet Secretary for Finance, Economy and Fair Work, told Hotel Scotland, “Our position remains consistent in that the Scottish Government has no plans to introduce a levy on the tourism sector, which is already subject to the second highest VAT rates in Europe by the UK Government”
Plus City of Edinburgh Council continues to act like a dog with a bone, by building the case for its proposed Tourist Visitor Levy (TVL). Part of the Council’s on-going research is a 40-page report claiming that any form of tourist tax wouldn’t deter overseas visitors to the capital because of Edinburgh’s strong international standing as a world-class tourist destination.

City of Edinburgh Council also claims that all 32 local authorities in Scotland have given their support in principle to a TVL. “Leaders across all 32 Scottish Local Authorities are expected to agree and launch a campaign to secure the legal power for local government to implement a levy. This signals increasing support across the political spectrum for the principle of local discretion to propose and implement a TVL,” says the latest communication from City of Edinburgh Council press office.

COSLA (Convention of Scottish Local Authorities) has also backed it. President, Alison
Evison said, “We want to strengthen local democracy and promote local decision making,
starting with giving councils the discretion to introduce a Transient Visitor Tax. Local government
is a sphere not a tier of government in Scotland. The devolution of powers has been the political hot potato of the last few weeks and it is right that we enter this debate in a mature, thought through manner.  Our ask of the Scottish Government today would be – devolve to local government the powers it needs to deliver services and build the local economy; give us the chance to empower public services and create opportunities for Scotland to flourish.

She continued, “The tourism industry should not be alarmed by this move. A Transient Visitor Tax (TVT) will be a tax on visitors and not on businesses.”

Tourist taxes do exist throughout the world land indeed New Zealand’s government has just announced that it will introduce an NZ$35 (£18) fee to enter the country that will be collected through an Electronic Travel Authority process, similar to the ESTA system the U.S. uses. It joins destinations like Barcelona, Paris, Rome, Berlin and Amsterdam, all enforcers of a tourist tax. Another city closer to home, Norwich, England, is flirting with the idea, but early indications suggest that this may have the lifespan of a Love Island relationship.

But back to Scotland, and with social media-making our world go around, a Twitter rant, spat, war or skirmish between public figures is always a sure fire way to give an issue oxygen – especially when it’s between two people who are shaping the policies that directly affect your business. That’s what happened when Edinburgh council’s Leader Adam McVey, who, at age 30 when he was appointed, as City of Edinburgh’s Council’s youngest ever leader, recently tweeted that a tourist tax would be implemented in a matter of 12 months – a claim immediately rebuked by culture secretary, Fiona Hyslop.

He has since had this to say, “First of all, it is important to point out that this would not be a tax on business; rather a small contribution by tourists towards the services they use during their stay with us. Edinburgh welcomes millions of visitors each year who bring investment, diversity and energy to our city but they also bring a cost in terms of the impact on our core services.

In terms of the research the council are undertaking, he said, “This research demonstrates
that not only is a TVL unlikely to adversely affect Edinburgh’s hotel industry, but that handled correctly, it can help to secure the ongoing sustainability and health of tourism in the city.

He continued, “I understand that there are those who remain to be convinced but I can assure
them that this is only the beginning of a considered, thoughtful and professional engagement with our partners across the tourist and hotel industry, the people of Edinburgh and the tourists who would ultimately pay the levy.”

The Scottish Tourism Alliance, the Scottish Licensed Trade Association, the Scottish Beer and Pub Association and the Association of Scottish Visitor Attractions have all called for independent research into the impact of a tourist tax.

UK Hospitality’s Executive Director for Scotland is Willie Macleod and he told Hotel Scotland, “Quite rightly Fiona Hyslop challenged Adam McVey in light of no agreement and no endorsement from the Scottish government. We’ve said to the Scottish government, look, you need to get a grip with this and I hope that in the next 12 months there’ll be a mature debate in a professional manner rather than City of Edinburgh council using the media. They are, I believe, doing research with residents and visitors and of course, residents are going to say ‘yes’ because they don’t want to pay any additional council tax.”

Macleod also argued that this is far from a level playing field in light of other European counties operating such a tax, while many successful tourist industries don’t. He said, “Many European
countries pay up to 50 per cent less tax. Ireland, for example, pays 9.1 per cent VAT and have no tourist tax. So what are we trying to do to our successful industry? Tax it out of existence?”

He was likewise keen to point out that such a tax is “iniquitous and discriminatory” for a variety of reasons. He explained, “Edinburgh gets 14 million visitor nights per year, yet there are also 18.4 million day trippers that would escape the levy. Plus average rates within a half a mile radius of Princes Street are not an insignificant amount by any means, so to suggest they are somehow not contributing is nonsense. We are already contributing to public funding and we are only able to do so because we run successful businesses.

He continues, “The UK is the second poorest country in terms of price competitiveness – 135th out of 136 – and we already have a high level of taxation on businesses. This single-minded approach by City of Edinburgh Council has involved no consultation with us. They spoke to a small number of individual hoteliers and with Edinburgh Hotels Association, who also share our view.”

CEO of Crieff Hydro, Stephen Leckie (this month’s interview on page 18) has also articulated his resistance to any such measures. He said, “We made our stance very clear via The Scottish Tourism Alliance. Too many folk – including MSPs – say that tourism is booming, which is true and false depending on which part of Scotland you’re referring to. It’s a bit of a patchwork when you look at the map. We also pay the second highest VAT rates in Europe, and in terms of expenditure, we are the most expensive.”

He continued, “They say that it’s going to be a levy of £1 – but who’s going to pay this, who is going to collect it? Why go for an easy swipe of taxing tourists? We already charge tourists and I suggest that local authorities look at their own coffers as we have to do within our own individual hotel businesses. We pay £50k per year for the apprenticeship levy and we get nothing back from it. Business rates are a quarter of a million pounds more per year and we get nothing back for that either. A tourist tax could be fatal.”

In our search for anybody in the industry in favour of the tourist tax, including asking David Wither of Edinburgh’s Montpelier Group,who told us that, “I have not spoken to one person that is in favour. Everyone is against. “ We were only able to find one hotelier prepared to publicly endorse this tax. Raul Leal, Chief Executive of Virgin Hotels, which has no presence in Scotland presently, but is planning a hotel on Edinburgh’s Victoria Street by 2020. He said, “Virgin Hotels is an international brand and we are well used to local tax arrangements and in Chicago we operate perfectly well with a local accommodation tax. If Edinburgh chooses to adopt this model we see no difficulties in operating in such an environment. Edinburgh is a vibrant and international city, and we want to be a strong partner in helping improve tourism for both Edinburgh and Scotland.”

Seeing as City of Edinburgh Council is speaking to local residents as part its research, so did we. Said one, who asked to remain anonymous, “I believe that it will come about because, broadly speaking, people that live in Edinburgh support it, as far as I can see. They see it as a tax that other people will have to pay. I also don’t see how Edinburgh Council can do all the things they have planned to do without it. But I can imagine it will not be popular with the hospitality industry. But when we go abroad we have to pay tourist taxes and in fact, when you are in the US you sometimes have to pay federal and state tax.”

So there you have it. If we remain passive as an industry and sleepwalk into this, this tax could very well become a reality for Scotland, giving us one more thing in common with New Zealand other than its majestic landscapes.

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Hotel Magazine Scotland News Team

Hotel Magazine Scotland News Team

Hotel Scotland is a new publication (2017) from the publishers of DRAM - Scotland's leading on-trade magazine. Hotel Scotland is a newsy magazine which covers all aspects of the industry in Scotland. From who's who, to industry issues and refurbishments.
Hotel Magazine Scotland News Team

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