The power to tax tourists could enable councils in the Highlands and Aberdeen to invest hundreds of millions of pounds in local infrastructure and facilities.
The prospect was raised by local authority chiefs from the Granite City and the north yesterday as they joined forces with their counterparts from Edinburgh to take the controversial “tourist tax” battle to Holyrood.
Highland Council convener Bill Lobban told MSPs that a £1-a-night levy could pave the way for a £120million capital spending spree on roads, car parks and toilets in the region.
And Aberdeen City Council’s co-leader Jenny Laing signalled that the money raised would be reinvested in cultural facilities to help the local economy prepare for its post-oil future.
Edinburgh, Aberdeen and Highland have led calls for councils to be given the powers, and have won backing in recent months from Scottish Labour and local authority umbrella body Cosla.
But many business leaders have reacted with alarm at the proposal, with one recent Federation of Small Businesses survey showing 73% of firms in the Highlands were opposed the move, and the Scottish Government has said it will “not consider” the move unless the tourism sector approves.
The row has been intensified in the Highlands by the pressure at tourism hotspots on Skye and around the North Coast 500 driving route, as well as an ongoing controversy over a council review of the future of 29 of the 96 public toilets in the region.
Giving evidence to Holyrood’s tourism committee yesterday, Mr Lobban said: “Our infrastructure is deteriorating and it will lead to a negative impression, and that will cause reputational damage.”
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He added: “Personally speaking I don’t actually accept the argument that visitors will be deterred from visiting the Highlands if we charge them a £1-a-night bed levy.
“In the Highlands we have some of the best food in the world, the best accommodation and the most magnificent scenery, but all that can come to nothing if the tourist pulls a wheel of his car, or has to go to the toilet behind a bush.”
Asked what the money would be used for, Mr Lobban told the MSPs: “We estimate that £1-a-night would generate roughly £12million. If you take that as revenue funding it’s £12million. If you actually capitalised it, that would give us something like £120million to spend on capital projects – toilets, car parks, roads, etc.
“There are many, many things that we would hope to discuss with the public and the industry about how we should spend that money. There are a wide variety of projects.”
However, Scottish Conservative committee member Jamie Greene responded: “Using it to reverse the closure of public toilets or fix roads, one could suggest should be being done anyway from existing budgets, or asking for more budgets from elsewhere.”
Giving evidence, Mr Lobban also suggested there was “some discussions to be had” about hitting day visitors from cruise liners with a levy, although he admitted tourists in camper vans would be “quite difficult” to charge.
Meanwhile, Mrs Laing said Aberdeen would seek to use the fund to build up the city’s tourism sector through continued investment.
“When we saw the downturn we saw the reduction in our occupancy rates, so we were looking as part of our regional economic strategy to diversify our economy, and tourism is a main element of that,” she said.
“What we’ve seen is that we need to invest. What we’ve done as a local authority we’ve led the way, we’ve had major investment in infrastructure – I’m thinking of our £30million in the art gallery, we’ve got a new TECA, a £330million exhibition centre, various cultural events that we are supporting in the city, whether it be the Great Run, Nuart, Spectra.
“And we understand that we need to invest in order to achieve that economic growth. But I suppose we are dealing with the same pressures as Edinburgh, I would argue a little bit more as the lowest funded council in Scotland.
“So we have to look for innovative ways to make sure that investment continues in the city of Aberdeen to support that sector.”
The UK is one of only nine countries in the EU that does not charge a tourist tax, according to recent research by Edinburgh City Council.
It provided examples of three different types of visitor levies already in place in other countries – the progressive tourist tax model, the tax liability model and the flat or fixed rate model.
A progressive visitor levy is a charge that varies by size on the type of accommodation, so staying in a more expensive hotel would incur a higher charge.
An example of this visitor levy type applies in Rome, where guests staying in a three-star hotel are required to pay between €4 per person per night, and €7 per person per night if they are staying in a 5-star hotel.
However, it carries the disadvantage of being more complex to administer, although the charges in Vicenza in Italy are based on the room rate.
The fixed rate visitor levy is a standard fee applied equally across all types and grades of accommodation, and is used in cities such as Lisbon, Prague, Dubrovnik.
This charge is no more than €1 per night, although it would arguably be felt more by visitors who stay in budget or cheaper accommodation as the fixed fee would make up a larger proportion of the final bill.
The tax liability visitor levy option, which operates in Brussels, involves every accommodation being classified with a tax liability per room, per year, depending on the number of rooms.
It can be easy to administer once the liability values are calculated and would offer a certain amount of revenue, and give flexibility to hotels to better respond to the market condition of visitor demand.
For example, the charge could be applied evenly throughout the year or varied to suit their individual business needs, such as charging a higher rate over peak seasons.