AAT’s stance on the Scottish Tourism Tax

Earlier this month, the Scottish Government launched a public consultation on the introduction of a tourist tax in Scotland.

Edinburgh Council has already said it wants to introduce a flat rate, £2 per person, per night tourist levy on visitors to its city. Others have similarly suggested imposing a flat rate tax like this is a good idea, primarily because it is seen as being “simple”.

In contrast, AAT has called on the Scottish Government to ignore these requests and instead introduce a fairer, easier to enforce, less burdensome tax, in the form of a percentage of the overall cost of accommodation.

Establishing whether or not a tourist tax is needed is a helpful starting point.

Is a tourist tax necessary?

AAT agrees with the Scottish Government that introducing a small tourism tax will, “…help deal with local pressures associated with sustained high numbers of visitors” but it should do more than this.

By raising money solely for tourism related matters – effectively a hypothecated tax – there is likely to not only be increased money for maintenance and improvements of tourist areas but increased spending on promotion. This is clearly in the best interests of Scotland and could well help to increase rather than decrease visitor numbers as sceptics fear.

There is also something to be said for the psychological power of ensuring visitors know that their visit can have a societal cost and making the tax a visible part of the bill will help to make this link.

The policy argument that this will promote greater local decision-making, because it will be up to local councils in Scotland to decide whether or not to introduce the tax in their area, has some merit but whilst this may be a key reason for the Scottish Government introducing these proposals, it is not an overriding factor in determining AAT’s position.

The overriding factor for us is that such a tax encourages, promotes and helps ensure tourism in Scotland is sustainable.  

So, what form should this tax take?

AAT surveyed its licensed members in Scotland on this issue and of the four options given, they were split 50/50 between two – a fixed flat rate fee per person on the grounds of simplicity as suggested by Edinburgh Council, and a more progressive percentage of overall accommodation costs. The fact AAT members were split directly down the middle was referenced in our consultation response but on balance we opted for the overall percentage model because it will be:

  • simpler to administer and enforce – given a per person charge requires the recording and reporting of how many people are staying in a room and their details
  • allows the levy to automatically reflect any seasonal adjustments to accommodation pricing
  • future proofs the tax from the impact of inflation, unlike a fixed per person fee
  • is more progressive e.g. someone staying in five-star accommodation will make a greater contribution than someone staying in a youth hostel whereas under the flat rate fee they would be paying exactly the same.

AAT has suggested the rate at which this tax be set is 2.5% of the overall cost of accommodation.

What is the actual cost to tourists?

According to research from PwC, in 2018 the average daily revenue (ADR) of a hotel room in Glasgow was £76.52; in Edinburgh it was £103.72 and in Aberdeen £54.14.

So, applying a 2.5% “Scottish Tourism Tax” would mean an extra £1.35 per night on average for a room in Aberdeen, £1.90 on average for a room in Glasgow or an extra £2.60 on average in Edinburgh.

There are some, most notably the Scottish Tourism Alliance, who argue that tourism in Scotland is extremely price sensitive and that any tax, no matter how small, will result in a decline in tourist numbers.

To take just one example, AAT does not believe that a tourist currently paying £76.52 a night in Glasgow is going to cancel their holiday or reduce the length of their stay if faced with an increase to £78.42 to incorporate a Scottish Tourism Tax of 2.5%. To suggest otherwise is simply not credible.

The Tourism Alliance also highlights that the Travel & Tourism Competitiveness Report 2019 recently published by the World Economic Forum, shows that the UK (not specifically Scotland) has fallen to 140 out of 140 countries on price competitiveness. If Scotland was the 140th most visited country in the world, then there would certainly be some merit to this argument, but it is not. In fact, with 15.3m visitors a year, Scotland continues to be one of the top 25 most visited countries in the world. Given these facts, such a narrow focus on price competitiveness gives a far from complete picture of the situation.

What is undoubtedly true is that setting the tax too high will have a negative impact. The recent introduction of €8 per person, per day tourist tax on visitors to Amsterdam adequately demonstrates this – it has decimated their tourist industry with the worlds largest cruise liners all avoiding the city. Likewise, the recent doubling of the tourist tax in the Balearics has led to a big reduction in visitor numbers.

The Scottish Government needs to ensure that the tax is successful enough to raise sufficient funds for investment in sustainable tourism, whilst not so high as to discourage tourism. A 2.5% tax on the overall cost of accommodation achieves this.

Further points from AAT on the Scottish tourism tax

As part of its consultation response, AAT also;

  • opposed the introduction of any day visitor charges as they are likely to discourage tourism
  • requested that the Scottish Government at least considers exempting Scottish residents as such an idea was not referenced in their list of potential exemptions
  • made clear that third party platforms like Airbnb must be responsible for the collection and remittance of the tax where they are involved in taking payments
  • urged the Government to require quarterly remittance of tax to coincide with VAT reporting requirements rather than the shorter or longer periods of time provided for in the consultation
  • suggested that the name ‘transient visitor levy’ be replaced with “Scottish Tourism Tax” to aid transparency and understanding, and that using the word “Tourism” also reinforces the link between the tax and its purpose.

The consultation is open until 2 December 2019.

You can submit your own response here.

Phil Hall is AAT's Head of Public Affairs and Public Policy.

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