Visitors to Scotland – and anyone holidaying at home – will soon be required to pay a new tax. The so-called ‘visitor levy’, passed by MSPs earlier this year , gives local authorities the power to add a charge on top of the cost of stays in hotels like mine, B&Bs and other overnight accommodation. Edinburgh is expected to be the first Scottish city to introduce the tax, which is likely to be implemented from 2026.
At least 16 other local authorities, including Highland and Aberdeen, are considering following suit. Advertisement Advertisement Sign up to our Opinion newsletter Thank you for signing up! Did you know with a Digital Subscription to The Scotsman, you can get unlimited access to the website including our premium content, as well as benefiting from fewer ads, loyalty rewards and much more. The Scottish Government calls the tax “a force for good” that will empower local authorities and help strengthen local democracy.
The City of Edinburgh Council says it will painlessly raise around £35 million in extra funding for services and to subsidise tourism infrastructure. Read More The tourist tax is just 18 months away so start preparing now - Caroline Colliston Readers' Letters: Does Kate Forbes want to help Hospitality or not? Mass protests on Majorca show why Scotland's tourist industry needs a tourist tax – Stephen Jardine Scottish Government 'open to introducing' cruise ship tax as tourist tax voted into law I’m afraid I take a different view. I see the visitor levy as a pernicious tax which will be charged on top of other taxes that can only damage tourism, the lifeblood of much of the Scottish economy.
In 2023, international visitors made a total of four million visits to Scotland, stayed for 34.4 million nights and spent £3.6 billion, according to Visit Scotland statistics.
So it’s vital that the government and all local authorities do whatever they can to encourage tourism. However, the debate on the potential impacts of the visitor levy has been minimal and I am worried that few people realise what is coming. A tax on a tax A flat-rate charge, as was initially proposed, would have been bad enough, but manageable if set at a low level.
Instead, ministers have decided to allow a percentage of the room rate to be charged on top, up to ten per cent. Each local authority will be able to decide if it wants to introduce a levy and what the level of the charge should be. I understand the tax will be levied on gross room sales before deduction of VAT so it is a tax on a tax, which is unheard of.
We have calculated that the proposed seven per cent levy in Edinburgh would mean a new tax of £1.3m being charged at The Balmoral, my hotel, every year – likely to be the highest amount in Scotland. That reflects our position as one of only two Forbes five-star hotels in the country, which we have invested in heavily as a vote of confidence in the Scottish economy.
But all holiday accommodation in Scotland, however modest, will be affected, immediately becoming up to ten per cent more expensive. With international tourism in Scotland still recovering from the devastating effects of the Covid pandemic, this is very high risk. The levy will need to be paid on top of 20 per cent VAT (compared to ten per cent in France) and other taxes such as flight departure levies, high alcohol taxes and business rates.
A blow to whole tourist economy Scotland is already not a cheap destination, and this can only deter cost-conscious visitors who will increasingly choose to go elsewhere. I expect we will see more foreign visitors choosing to spend two nights instead of three in Edinburgh, and more time at destinations in England where no visitor levy will apply. Visitors are also likely to spend less while they are here, given that their accommodation will be pricier.
That will hit the entire tourist economy – retailers, taxi drivers, restaurants and cafes, museums, galleries, tourist attractions – anywhere that visitors currently spend money. Advertisement Advertisement It will also deter guests wanting to leave tips or service charges for staff. At The Balmoral, we give guests the option to leave a five per cent service charge for staff.
A visitor levy is bound to mean fewer guests doing so and less money in the pockets of our workers. Stealth tax on Scots While it is labelled a ‘visitor levy’, the new tax will apply equally to Scottish people who want to holiday at home. For them, it is in reality a homegrown stealth tax.
If we use VisitScotland estimates for visitor numbers in last year, £35m of an estimated £142m raked in by the levy will come directly out of Scots pockets. This can only discourage staycations and further depress spending in Scotland. To add insult to injury, hospitality providers will be in charge of collecting the levy and handing it over to local councils – adding significantly to bureaucracy and the costs of running a business.
UKHospitality is right to insist that hotels should be reimbursed for the costs involved in preparing IT and admin systems for handling the levy payments. The thousands of businesses that provide accommodation across the country – hotels, B&Bs, guesthouses, hotels, holiday homes, campsites, caravan parks and self-catering businesses – should be deeply worried about the effects of the levy. Councils should snub levy That’s why I support calls by the Scottish Bed & Breakfast Association for local authorities to boycott the tax which they say will "discourage travel and tourism in Scotland and will lose our crucial tourism industry's competitiveness against Europe and England".
Holyrood has passed the legislation enabling the visitor levy with little or no consideration of the real-world impact. But that doesn’t mean councils have to go ahead and use their new powers. Those that refuse to introduce a levy will gain an immediate competitive advantage over those that do.
It’s time for all of us with a stake in the tourist economy to make our views known and, wherever we can, kill this stealth tax at birth. Scotland should be open to the world and the visitor levy will be bad for Scotland plc, bad for jobs and bad for economic growth. Sir Rocco Forte is chairman of Rocco Forte Hotels Comments Want to join the conversation? Please register or log in to comment on this article.
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