The tax, which would raise about £11m per annum for the capital, would be used to manage some of the impacts of the booming tourism sector in Edinburgh.
On the one hand recent survey results from the Edinburgh Chamber of Commerce showed that 70 per cent of businesses would support the introduction of a tax. However on the other side you have the Scottish Tourism Alliance saying there needs to be further conversation and debate on the issue before anything is decided.
While tourism taxes are common across the EU, the UK hospitality industry seems to be strongly opposed to introducing such a tax on the basis that it’s not competitive, and that the UK already levies one of the highest rates of VAT on tourism services in the EU.
It’s not just The City of Edinburgh Council that is currently involved in the debate. The Highland Council has also recently announced that tourism tax is up for consultation after seeing an influx in tourism to the region, with almost 6.5 million visitors to the area last year. The tourism tax proposed by The Highland Council could raise between £5m to £10m per year.
These real examples are forcing local councils across the UK to consider the impact of what a tourism tax could mean for their local area as the sector continues to grow, and what key factors they would need to contemplate if it was to be introduced.
As a starting point, local councils need to provide clarity on how the funds raised from the tax will be used as well as consider how the funding will complement the support that is already provided through central Government.
For example, the Rural Tourism Infrastructure Fund by the Scottish Government will see £6 million invested over the next two years to support tourist facilities and communities in rural Scotland. The Fund was developed in part to support increased tourism in the Highlands as a result of the North Coast 500 route. The Highland Council should therefore consider if the additional tourist tax is a necessity, or if it will deter tourists to other parts of Scotland that are not taxed.
Tourism taxes have become common in many parts of the EU and can be seen as a way for cities to raise funds that support their growing tourism industry. But it will be important for councils across the UK to ensure the taxes they propose maintain their competitiveness in the market, and they will need to provide clarity to stakeholders on how the funds will be used in order to gather support and ensure an open debate ahead of any sort of successful implementation.