The Scottish Government’s Budget (Stage 1 Debate): Tourist Tax

The Scottish Government reached an agreement today (31st January) on local government taxation with their traditional Budget allies, the Scottish Greens, in order to support their 2019-20 spending plans at all parliamentary stages.

 

• The Cabinet Secretary for Finance, Economy and Fair Work, Derek Mackay announced that the Scottish Government would take steps to significantly empower local authorities – this would include the devolution of powers to introduce a transient visitor levy, as advocated by COSLA.
• The Scottish Government will now undertake a formal consultation on the principles of a tourist tax before introducing legislation to enable local authorities, should they wish, to introduce a levy.
• In his response, the Shadow Cabinet Secretary for Finance Murdo Fraser criticised the “triple tax bombshell” provided by the SNP Government, including “broken promises” on previous commitments not to introduce a tourist tax.

 

Scottish Tourism Alliance’ Chief Executive, Marc Crothall, said:

“This afternoon’s announcement that the Scottish Government will legislate to provide local authorities with powers to raise additional revenues through a Transient Visitor Levy (TVL) is beyond disappointing and will deliver a significant blow to our industry.

“The national consultation on a tourism tax, undertaken by the Scottish Government only drew to a close last Friday, thus providing just three days to assimilate and analyse the evidence shared by the many businesses and organisations that took time to contribute to this national discussion through various channels.

“A decision of such importance and one which has the potential to cause significant negative impact, not just to businesses who provide visitor accommodation but to all businesses that benefit from tourism economic activity, has been reached prematurely. It will only serve to undermine the confidence that the thousands of tourism businesses operating across all sectors of the industry has had in the Scottish Government, both in its commitment to conduct in depth research and economic analysis and consider views, prior to reaching a decision on one of the biggest threats to the sector.

“Whilst we acknowledge the Scottish Government’s commitment to conduct a formal consultation, we sincerely hope that there will be further economic analysis and detailed transparent examination of options to assess the impact a tourism tax will have Scotland’s economy, before any implementation of a TVL be permitted to come into force.

“We look forward to early discussions with Cabinet Secretaries and Ministers to establish what conciliatory measures might be adopted following today’s announcement to support a sector experiencing significant challenges in relation to its future growth and sustainability and of course to learn more about the proposals for a formal tourist tax consultation.”

The Federation of Small Business issued the following statement:  

This afternoon the Cabinet Secretary for Finance Derek Mackay announced changes to his draft budget to secure parliamentary support. He outlined a range of new measures which will have an impact on smaller businesses.

Andrew McRae, FSB’s Scotland policy chair, said: “The Scottish Government’s draft budget was a spending programme that most firms could welcome.

“But today we’ve seen concessions from the Cabinet Secretary for Finance that will erode the small business community’s trust in his administration. Instead of Brexit help for firms, we see more tax changes, including a levy on our vital tourism industry.

“Ministers repeatedly promised firms that they would not pave the way for tourism taxes without industry support. They’re breaking that promise today.

“Increased plastic bag and cup charges and new workplace parking levies won’t be the end of the world, but it hardly sends out the message that Ministers understand the pressure that households and businesses are under.

“We are also concerned that the decision to allow local authorities to control empty property rate relief sets a worrying precedent, could lead to the full localisation of the rates system and eventual higher bills for local businesses. It also runs roughshod over commitments associated with the Barclay review of business rates.

“These measures alone will unlikely be the difference between success and failure for many firms. But when business pleaded for stability, it doesn’t seem like we were heard. We’ll make the case to mitigate the impact of these proposals, but Ministers have bridges to build.” 

• Polling from last year revealed the overwhelming majority of businesses in the Highlands, in Aberdeen, and in Edinburghare against the introduction of a tourism tax.
• FSB received a letter from the Cabinet Secretary for Tourism Fiona Hyslop on 20 June 2018 which stated:

 “The Scottish Government position remains consistent: we have no plans to introduce a levy on the tourism sector which is already subject to the second highest VAT rates in Europe by the UK Government.

 “In addition, the Scottish Ministers are not willing to consider requests to explore a possible tourism levy unless the tourism and hospitality industry are involved from the outset and their long-term interests are fully recognised.”