Scottish government seeks public views on proposed tourist tax

The Scottish government has introduced the Visitor (Levy) Scotland Bill (1.98MB PDF/36 pages) and launched a public consultation on its proposals to charge a tourism tax for people who purchase overnight stays in certain accommodation. If it becomes law, local authority councils would have the power to add a tax to overnight accommodation, such as hotels, B&Bs, holiday rentals and campsites.

The tax would be calculated by a percentage of the total accommodation costs, with the potential for the percentage rates to vary for different purposes or different areas within the local authority area. Local authorities will have the discretion to impose the tax, and to decide whether it applies to all or only parts of the local authority area. However, authorities will not be able to set different rates for different types of accommodation.

Under the proposals, accommodation providers will collect the tax, which will then be remitted regularly to the local authority. A third-party can also carry out this role. The government’s intention is that the money collected would be invested locally on facilities or services that are used by visitors, so the tourist experience can be enhanced whilst delivering benefits to local economies and communities.

If implemented, it will align Scotland with other European countries and parts of the world that charge a similar tax. As of 2023, 21 of the 27 EU member states charge occupancy taxes. While there is currently no direct equivalent in the UK, Manchester became the first UK city to impose a “tourist tax” for visitors in April 2023.

The Scottish Bill came as part of a call to reduce councils’ financial reliance on the Scottish government and council tax. However, the proposals have been met with criticism from businesses in Scotland’s tourism industry. Representatives of the tourism industry have highlighted the pressure of existing taxes, such as the rate of VAT applied to accommodation compared to other countries, while hospitality businesses have expressed concerned about potential increases in wider business costs.

Licensing law expert of Pinsent Masons Audrey Ferrie described the proposed scheme as “unnecessarily complicated”.

“It will add to the burden on under resourced local authorities. Moreover, at a time when tourism businesses are struggling to find staff and pay bills, another tax could be the final straw for many,” she said.

According to the Bill, a series of administration and enforcement actions will be required from local authorities operating a tourist tax scheme. For example, local councils will be required keep separate accounts for the scheme, provide an annual report on the scheme, regularly review it and take enforcement action against liable accommodation providers, such as conducting investigations and issuing penalties for failing to pay the tax.

Abbie Hunter of Pinsent Masons added: “The introduction of the tourist tax might discourage visitors, especially in the current economic climate and the cost-of-living crisis which will adversely impact businesses”.

“It will be a regulatory burden for businesses as the liable person for collecting the payment from visitors and paying this to the local authority,” said Hunter.

The public consultation on the Bill went live on 26 June and will close on 1 September 2023. It seeks to gather opinions from the likes of tourism organisations, businesses and community groups. A report will be produced based on the feedback from the consultation and followed by a debate on whether the bill is to proceed.