Visitor tax, nice idea but flawed

The idea of introducing a visitor levy to help fund infrastructure and services is, in principle, sound. It gives local councils a way to address challenges caused by tourism and invest in their communities. But how it’s being implemented has raised concerns that can’t be ignored - and many people feel their voices aren’t being heard.

One of the biggest issues is where the money goes. It’s clear the revenue must stay local. On Skye, for example, this point couldn’t be more unanimous. A survey by SkyeConnect found that almost 90% of respondents believe funds raised on the island should directly benefit the island. Yet, the current plan would see all money generated going to a central fund held by Highland Council, with little promise that the money would return to the communities that generate it. Equally important, the levy shouldn’t just replace services already provided by Highland Council. This should be about improving things - not just plugging gaps in existing budgets.

Another big issue that sets Scotland apart from other destinations that have successfully implemented tourism levies is the high VAT rate. The UK has Europe's second-highest VAT on tourism services, standing at 20%. This puts Scotland at a competitive disadvantage in international tourism markets. Any additional tax could further diminish the sector's competitiveness, as the World Economic Forum already ranks the UK towards the bottom for international tourism price competitiveness.

The domestic market, which accounts for approximately 60% of Scotland’s tourism spend, is also under pressure. Many UK residents face financial challenges, and the rising costs affecting tourism businesses – from energy prices to staff shortages – are already straining the sector. Introducing a new levy could discourage domestic visitors, potentially hitting small businesses in rural areas the hardest.

Another key concern comes from small business owners, particularly in the self-catering and B&B sectors. These businesses are vital to local economies but are already stretched thin. According to SkyeConnect’s survey, 70% of respondents from these sectors said they wouldn’t have the resources to handle the admin of the visitor levy. If the system creates more red tape, it risks doing more harm than good.

Then, there are the glaring omissions in the legislation. Cruise ships bring many tourists and aren’t included in the levy. That’s a huge oversight. My colleague in the Scottish Parliament, Liam McArthur, raised this when the levy was being passed - yet the Government failed to act on his concerns.  These visitors often overwhelm local services but don’t contribute financially to their upkeep. The same applies to day-trippers and camper vans - they dominate roads and car parks, causing congestion, but bring little economic benefit to the areas they visit. Including these groups in the levy would be a step towards fairness.

Ultimately, this could be an excellent policy. But it must prioritise fairness, keep money local, and include the voices of the communities it’s supposed to help, without putting unnecessary strain on small businesses or residents and ideally accompanied with a cut in VAT called for by many in the hospitality sector.