Edinburgh has become the latest city to consider a tourism tax, to help find local businesses put under pressure by rising visitor numbers.
Edinburgh joins New Zealand and the Balearic Islands to seek to use taxation to address the issue of ever-expanding tourism.
Last month City of Edinburgh Council leader Adam McVey commented on Twitter that a tax would be introduced in the city “in the next 12 months”. The tweet followed almost six months of debate in the Scottish capital over a “transient visitor levy” or bed tax, which would see one pound added to bills per bed per night.
In a debate on the issue, McVey said: “It would be an underestimate to say this has been a long time coming. I absolutely defend not only the festivals and their fantastic contribution to our city’s culture and our city’s fabric. It has probably the most vibrant hospitality sector in the entire world, supporting tens of thousands of jobs right here in Edinburgh and raising millions of pounds not only in wages and in taxes but in other contributions and benefits for a whole host of other things including some of our services like some of our museums.
“That said, with such a level of vibrancy come consequences that we need to manage and mitigate. The transient visitor levy is all about trying to raise additional money, a small levy placed on particularly the hotels in [a city with]one of the most regularly highest occupancy rates anywhere outside London.
“It is a very, very strong hotel market in this city and to ask them to add a small levy to those stays in helping us fund the things that we pay for to create that vibrancy.”
Enacting the tax would require the Scottish government to grant the council the power, by no means a certainty.
UKHospitality CEO Kate Nicholls said: “The introduction of another tax aimed at hardworking, innovative and economically and socially important hotels in Edinburgh could be potentially disastrous knock-on impact on businesses.
“Adam McVey has rather blithely announced on social media that a tourist tax would be introduced in the city within 12 months; yet there has been no meaningful consultation with the businesses at risk and no wider discussion with the national organisations representing the hospitality and tourism sector.
“Hotels and hospitality businesses are already facing a mountain of costs and any additional tax, no matter the cost, would present vital employers with a significant barrier to growth an investment. The UK is one of only three EU countries which does not have a reduced rate of VAT on hotel and tourism services – by comparison, the rate of VAT on hotel rooms in EU countries is about half of the 20% rate applied in the UK. In the majority of EU countries which have some form of tourist tax, there is a reduced rate of tourism VAT.
“The Scottish government is rightly of the opinion that any such tax would be harmful to businesses in the country and we welcome Tourism Minister Fiona Hyslop’s assertion that no measure should or could be introduced without agreement from the government and discussions with the hotel sector.”
Nonetheless, tourism taxes are a growing trend. At the end of last year Malaysia and the Balearic Islands both focused attention on tourism taxes, as they sought to control visitor numbers.
New Zealand was the latest country to propose introducing a tourist tax of NZD35 (GBP18) for visitors entering the country, expected by late next year. The government said that the tax would ensure tourists “contribute to the infrastructure they use and help protect the natural environment they enjoy”.
The efforts came as the UNWTO reported that international tourist arrivals had grown by 6% in the first four months of 2018, compared to the same period last year, not only continuing the strong 2017 trend, but exceeding UNWTO’s forecast for 2018. Growth was led by Asia and the Pacific (+8%) and Europe (+7%). Africa (+6%), the Middle East (+4%) and the Americas (+3%) also recorded sound results. Earlier this year, UNWTO’s forecast for 2018 was between 4-5%.
“International tourism continues to show significant growth worldwide, and this translates into job creation in many economies. This growth reminds us of the need to increase our capacity to develop and manage tourism in a sustainable way, building smart destinations and making the most of technology and innovation”, said UNWTO secretary-general, Zurab Pololikashvili.
HA Perspective [by Katherine Doggrell]: The hospitality sector makes much of the amount that it brings into the economy in this country, in terms of jobs and hard cash, but is never slow to ask for a VAT break. At the time of writing, much of the country was wondering whether there would be anyone left in the government to run the country, let alone fiddle around with VAT cuts. And those left standing after the latest power spat will very much need whatever tax is coming in. The era of the potential VAT cut is long gone, if it was ever really an option.
But on the other side of the tax form, would a bed tax be too much of a poke in the eye for the hotel sector, or can it survive one pound per bed per night? Is there a point where the sheer volume of guests coming into a destination make that destination less attractive? If your argument is that you can’t make money in a destination stretched to breaking point by the gallons of tourists flooding all over it, should you be considering at least a correspondence course in business?
These are a lot of questions for destinations such as Edinburgh, London, Bath and Bristol, cities which have, in the last 12 months, considered a bed tax. There is no doubt that in some cases the council smells easy money, in other cases expanded power. But even if enacted, bed tax alone will not solve the issue of over tourism, as councils across this land are not known for their sharp decisions (Bath, for example, had a long-term policy of refusing to add to the city’s paltry number of car parking spaces, to act as a deterrent to drivers. It almost goes without saying that almost no investment was made into public transport to compensate).
So eyes are on Venice, Barcelona and the cities which last year saw extensive anti-tourism protests to see if they can find a solution which works for locals and visitor. A limited number of travel permits has been mooted for Venice. These are likely to be allocated not by lottery, but through a payment. The allocation of the scarce resource of global must-sees is likely to come down to money. But not neccessarily a bed tax.