Highland visitor levy could be death knell for some north businesses

Trudy Morris, chief executive of Caithness Chamber of Commerce, argues that a fresh new look is needed for the region’s proposed ‘tourist tax’

As I sit down to write this column the first spring bulbs are emerging from the soil and the days are beginning to stretch. It seems that spring is finally arriving and with it the promise of a busy year for our tourism industry.

Each year, the north Highlands attracts close to 800,000 visitors, drawn to our unique landscape, rich heritage and warm communities.

We have a vibrant and resilient hospitality sector in the Highlands, which has stood together through tough financial times and the ups and downs of the post-Covid economy.

Today, the issue that looms the largest is the proposed Highland Visitor Levy. The levy – more informally known as a ‘tourist tax’ – is a Scottish Government proposal to add a percentage charge to overnight accommodation. At a regional level, Highland Council is proposing a 5 per cent rate, which it says will generate income to invest into tourism infrastructure.

As CEO of Caithness Chamber of Commerce, I work closely with the other three highland Chambers of Commerce – Cairngorm, West Highland and Inverness – and together we represent more than 1200 businesses. The Highland Visitor Levy is the number one issue currently filling our inboxes, and our members have raised serious and thoughtful concerns.

In December, we came together as four chambers to jointly call for Highland Council to pause the implementation of the levy. Since then, we have engaged closely with members, and while a slight majority support the principle of a visitor levy in some form, there is no support for the proposal as it currently stands.

Last month, Highland Council convener Bill Lobban wrote to Ivan McKee, minister for public finance, to express the council’s preference for a flat-rate levy instead of a percentage fee. The Highland chambers fully endorse this amendment and have also written to the minister asking for changes to the legislation.

Our accommodation providers have told us a percentage-based rate will be burdensome to collect, and while Highland Council will recoup its own administration costs of around £550,000, there is no compensation planned for businesses.

Some of our members have been kind enough to share their results with us, and we are convinced that most accommodation providers can’t afford to pay this levy. The unintended consequences could be the closure of some of our businesses, leading to a loss of local employment and reduced visitor numbers.

Supporters of the levy say that businesses don’t pay the tax, tourists do, but when you dig deeper it’s clear that this is not the case. First of all, the levy is not only paid by visitors – people from across the Highlands doing business in Inverness will pay, and if you’re visiting relatives in hospital you’ll pay too.

Secondly, because the rate is rolled into the room rate and the accommodation providers’ turnover, it is subject to VAT and constitutes a double tax.

Visitors to the north Highlands add the best part of £200m to our economy, but that vital tourist spend could well reduce when a visitor levy is added to the cost of a holiday alongside the existing pressures created by the cost of living crisis. There is a very real possibility that the levy will do more harm than good.

I am aware of concerns in the area about over-tourism and the impact of increased visitor numbers. Those challenges require a widespread public awareness campaign around responsible tourism, coupled with significant investment in our tourism infrastructure.

Highland Council estimate they will receive around £10 million in income from the levy, and we share their desire to deliver improvements in services for the benefit both of locals and visitors. However, this specific levy proposal is not the right vehicle. It comes with scant detail around how the money would be collected, how businesses would be compensated and – crucially – how the money would be spent.

For those reasons, the Highland chambers have asked the council to undertake an independent impact assessment and set out a detailed plan for at least the first three years’ investment. That will require a pause in the implementation – not a short one, but one that allows sufficient time for a complete redesign and a more considered engagement process.

Please join us by adding your voice to the consultation by the end of March.

Tourism fund should be collected by VisitScotland

Members View by David Whiteford

Highland Coast Hotels has seven hotels employing up to 240 people at peak season and spending over £3 million on local supply chains, so I am writing today with the coalface perspective on this proposed Highland Visitor Levy.

In the past I have been a keen proponent of flat-rate tourist levies. They can be seen all over the world and operators I meet are positive about them because they’re easy to administer and spent wisely on tourism infrastructure improvements.

That is not the case with this proposal, which is pitched at a 5 per cent levy – with no option in the consultation document to suggest a lower level.

To give some backdrop to this, I sadly have to paint a pretty bleak picture of our sector, which has been hit by blow after blow. The upcoming increase of 1.2 per cent on National Insurance is huge for us and many other hospitality providers.

VAT in the UK is the highest in Europe, at 20 per cent, and unlike our UK neighbours we have yet to benefit from the 75 per cent relief on business rates. All of this means the sector has real difficulty offering our guests value for money. We are gradually pricing ourselves out of the market and visitors are voting with their pockets, as well as their feet.

The consultation process from Highland Council has felt like a fait accompli and it’s disappointing to see the “copy and paste” approach from Edinburgh Council, which disregards the specific needs of rural areas.

I am also concerned about how the funds raised might be spent. For me the collection body should be VisitScotland, with an area committee making funding decisions. The level of spend should be pro rata with the funds collected in that area and as funds raised by the private sector could be matched by public sector contributions.

I’m also a farmer and whilst I don’t farm camels, I do have straw on the farm, and I really feel this visitor levy, as it is being proposed, could well be the last straw for our sector. Please reject it in every way possible, so that we can go back to the drawing board and through proper engagement and industry input, find a better solution for much needed infrastructure development.

• David Whiteford is chairman of Highland Coast Hotels.

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