Cut Tourism VAT

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Tuesday, 22 January 2019

Threat of Tourism Tax in Edinburgh

Sunday, 20th January 2019

Threat of Tourism Tax Growing

Fears are growing that a tourism tax will soon be introduced in Edinburgh as the City council recently held a consultation with local tourism operators in light of a proposed Transient Visitor Levy (TVL). If introduced, a charge of £2 per night, or 2% of total room costs, would be implemented for up to seven days a week, applicable all year round. The council claims that the consultation had ‘dispelled fears’ that operators opposed the levy, concluding that 51% of tourism operators who responded were in favour of the proposal, with 85% of all respondents agreeing.

However, the proposals have faced widespread criticism. UKHospitality called the consultations’ findings into question, noting that the 87 accommodation providers who responded to the council comprised just 4% of the total currently operating. Critics of the levy fear that the proposed price increases will make Edinburgh’s tourism industry less competitive, compared to other major European cities which are not burdened by tourism taxation. Research completed by UKHospitality estimates that the “annual negative economic impact which will arise from the imposition of a TVL at £2 per room, per night will be in the region of £175m-£200m in Scotland (£44m-£94m in Edinburgh).” Such losses would outweigh the estimated income raised through the TVL. A report produced by the Mallorca Tourist Board is equally pessimistic. It found that tourism taxes reduced competitiveness and benefited ‘irregular accommodation’ providers who do not have legal hotel status. Similarly, a report produced by PricewaterhouseCoopers LLP for the European Commission in 2017 concluded that a “reduction in tourist taxes is likely to have a large positive impact on tourism and, by extension, the wider economy.” The report highlights London as a prime example of this, as the city does not charge a tourist tax but enjoys the status of most-visited city in Europe. Paris, Istanbul, Barcelona and Amsterdam all rank below London and all implement a form of tourist taxation.

The Transient Visitor Levy comes at a time when tourism hotspots, like Edinburgh, face uncertainty with the forthcoming departure from the EU. Marc Crothall, Chief Executive of the Scottish Tourism Alliance expressed particular concern about the wisdom of further taxation whilst the industry is already facing numerous challenges. In response to the proposals, he said: “Most businesses are seeing profits erode, thus putting even greater pressure on the ability to invest in their product and their teams… What our tourism industry, especially the hotel and accommodation sector needs, is a time of stability and the opportunity to strengthen and grow.”

The consultation opened on the 15 October and closed on 10 December 2018. The council are due to consider these findings at its upcoming meeting on 7 February 2019.

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