On 28 May 2024, the Scottish Government passed the Visitor Levy (Scotland) Bill.

The bill introduces a ‘visitor levy’ - a tax to be paid to local authorities on the purchase of overnight stays in certain types of accommodation.

What are the key provisions of the bill?

The bill allows local authorities to devise a scheme for implementing a visitor levy. The tax would be a percentage of the accommodation cost before VAT, rather than a fixed fee. The scheme must specify the exact nature of the levy, including:

• the scheme area;
• the date on which the scheme comes into force;
• the period in which the scheme will be in force;
• the rate of the levy;
• the scheme’s objectives; and
• ways to appeal and review decisions taken by the local authority in relation to the scheme.

At the last stage of the bill amendment process, new provisions were made, including:

• an exemption from paying a visitor levy for people in receipt of disability benefits from the UK / Scottish Government;
• a power for the Scottish Government to cap the number of nights to which a visitor levy would apply; and
• a requirement for a local authority setting up a scheme to establish a visitor levy forum  (within six months of the decision to introduce a scheme) which will discuss and advise the council on the scheme and the use of proceeds;
• a requirement for the Scottish Government to review the bill no more than three years after the first scheme being enforced.

Scotland is not the only country to implement a levy. In 2023, 21 of the 27 EU member states charged a visitor tax. Most European countries charge up to five per cent of accommodation cost or €3 per night, depending on location. As with the Scottish approach, taxes are charged depending according to accommodation, season and / or destination. Similarly, other countries also offer exemptions and reduced rates for certain groups of visitors.

When will the bill come into force?

There is no precise date at present but the earliest the levy could come into force is spring 2026. Before any local authority can introduce the scheme in their area, an 18-month implementation period will apply. As set out below, a consultation process will also be required. Therefore, there will be plenty notice and time for adjustment before any levy is implemented in an area.

How will proceeds of the levy be used?

The bill’s policy objective states that funding raised from the levy must be spent on the visitor economy, including new resources or facilities, where required. The aim is to use the funds to invest in the relevant city and develop the visitor economy. The City of Edinburgh Council, for example, is considering creating a steering group which include (among others) industry representatives to assist shape how the levy would be invested.

How might this impact the private sector?

Some believe that the levy will add to the burden faced by small tourism providers, particularly in an industry recovering from the pandemic and currently being challenged by the cost-of-living crisis. Furthermore, accommodation providers may face an administrative burden in handling the levy payments. As a result, some organisations are calling on councils to reimburse the accommodation providers for the time and money spent in dealing with the levy. Another concern is that the levy will apply to international and domestic visitors which will work as a competitive disadvantage for Scotland as a holiday destination. Consequently, a levy may deter visitors. However, as such levies have become commonplace worldwide, tourists may be less sensitive now to making such payments.

Despite concerns, others view it as a step towards Scotland being a sustainable tourism destination. Funds can be used to develop facilities that may be used by locals and tourists alike. There is the potential for growth within the sector as additional investment into facilities could make Scotland a more attractive destination. Some argue that a visitor levy simply reflects the costs of tourism and requires tourists to pay for the extra costs they generate, such as car parking and keeping areas clean.

The private sector will likely not be impacted in the same manner across Scotland. The Scottish Government has acknowledged that a ‘one-size-fits-all’ approach does not work. Rather, individual local authorities will identify the need of their areas and economies.

How can organisations in the private sector share their thoughts?

Before a scheme is introduced, the bill requires the local authority to publicise an outline of the scheme, circumstances under which the levy is not payable, a statement about the objectives of the proposal, and an impact assessment. The local authority must consult with tourism-related businesses and tourist organisations in the area. A report must then be published which summarises the consultation responses and states whether the local authority will proceed with the proposal, along with its reasons for doing (or not doing) so.

Once the levy has made net proceeds , the local authority must consult (from time to time) with businesses engaged in tourism and tourist organisations in the area when using the proceeds.

As such, organisations within the private sector will have an input in decisions made about the levy. However, it remains to be seen how much weight local authorities place on these opinions.

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