Taxing times ahead for tourists with visitor levies

The Scottish Government’s Visitor Levy (Scotland) Bill is expected to be passed in August 2024 and will provide local authorities with the option to introduce a Visitor Levy Scheme within their area. Scott Ritchie and Robbie McElroy explain and look at what such a scheme would mean for the Scottish tourism industry.

22 November 2023

Tourists in Scotland

Can you ever have too much of a good thing?

In certain areas of Scotland, there’s a feeling that you can when it comes to tourism.

Local authorities in hotspots such as Edinburgh and Skye have been lobbying central government for extra resources to cope with the surge in visitors arriving on their doorstep each year. In response, the Scottish Government’s Visitor Levy (Scotland) Bill has recently been through a public consultation process.

It is expected to be passed in August 2024 and will provide local authorities with the option to introduce a Visitor Levy Scheme within their area.

What exactly is a visitor levy and how does it work?

The proposed version in Scotland is focused on overnight rather than day visitors, so no day rate would be able to be imposed like the five-Euro day-charge currently planned in Venice, Italy.

As well as covering traditional visitor accommodation types such as hotels, hostels, B&Bs, and caravan and camping parks, it also captures serviced apartments and purpose-built student accommodation (when used for holiday lettings outside of term time).

The Bill does not specify a blanket rate for the levy. This is left to the discretion of each council but must be a percentage of the cost charged for the overnight accommodation. As such, the levy will work on a sliding scale where the fee payable by visitors to higher per night cost accommodation will be more than those in lodgings at a lower price point.

The levy may be applied differently depending on the purpose, or to different areas within one local authority’s jurisdiction. For instance, a local authority could impose a special charge at times of high visitor footfall for a one-off event such as a festival. It is not possible for varying levy rates to be applied to different types of overnight accommodation. All must be treated equally.

Another key point is that accommodation providers as owners or tenants of the premises will be responsible for the collection of the levy and payment of the tax rather than the visitor.

The Bill makes no provision for a “cap” to the maximum levy amount payable or to the number of days for which it is charged. This contrasts with previous proposals in Edinburgh which provided for a cap of seven days.

The proposals also include rules on how money taken by a visitor levy must be spent. All proceeds must be kept by a council in a separate account and be reinvested exclusively into tourism facilities and services. The money therefore will not necessarily benefit the whole council area, and that is something some politicians have suggested should be looked at in policy terms.

Do visitor levies work?

European locations, such as Barcelona, Berlin, Paris, Lisbon, and the Balearic Islands, have already introduced similar levies. The evidence from these destinations shows that typically growth in visitor numbers has continued, including strong growth in overnight visitor numbers.

However, the Bill concedes it is plausible visitor numbers may have been even stronger without the levy, and the impact assessment acknowledges the risk of economic impacts arising from the introduction of additional taxes on the visitor economy in local areas.

It is hard to draw parallels between other countries with very different tax frameworks, with each having varying levels of corporation tax, business rates, and VAT.

Following the recent public consultation, Shepherd and Wedderburn approached the Scottish Tourism Alliance (STA), the largest member organisation for tourism and hospitality businesses in Scotland, for comment. They claim that the levy is a “watershed moment in how the Scottish Government works with business” but cautioned that there must be a “maximum cap…so that secondary spend in other areas of the sector is not at risk of being diluted. There is a tipping point for every visitor”. The Federation of Small Businesses echo STA’s concern that the levy must be “as simple and streamlined as possible for visitors, businesses and local authorities to understand”.

It is not straightforward to gauge yet whether the visitor levy will positively or negatively impact Scottish tourism. Initial reaction from industry bodies following the consultation period suggests that stakeholders do see potential to bring value to the tourism industry. The execution of how the levy is introduced - and whether it succeeds in delicately balancing the interests of businesses and visitors - will be crucial to its success.


An earlier version of this article first appeared in The Scotsman.