Edinburgh welcomes millions of visitors each year who bring investment, diversity and vibrancy to our city. However, they also bring a cost in terms of the impact on our core services. We believe that a transient visitor levy (TVL) – more widely reported as a “tourist tax” – is in the best interests of our residents, our tourism industry and visitors.
With more than four million visitors annually, tourism is an important contributor to the city economy, providing 35,000 jobs and generating £1.5bn. From 2010 to 2015, the number of visitors rose by 18 per cent, while visitor spend rose by 30 per cent over the same period.
To remain a global destination, Edinburgh needs to continue to invest in the areas that make the city a success story. The revenue raised could support key services for residents, visitors and create positive benefits for the industry. These may include improving the public realm, investing in parks, public spaces, clean streets, and improved marketing of the city.
Each year, City of Edinburgh council seeks feedback on its specific budget proposals and gives opportunities for citizens to submit ideas for how they think the running of the city can be improved. Although not mentioned in any of the engagement material, 42 per cent of all ideas submitted in 2017’s budget consultation referred to some form of a tourist tax, more than any other suggestion received that year, or previously.
Clearly, we need to find a solution that balances Edinburgh’s growing tourism demand against our council’s budget pressures. Similar taxes elsewhere in the world raise significant amounts of money, which is reinvested into public services for the benefit of residents and visitors alike.
The introduction of a levy could bring substantial revenue: a small charge of £1 per person per night could generate more than £11 million per annum. Depending on the model, an Edinburgh transient visitor levy could raise between £5m and £29m a year.
Our initial research shows that not only is such a levy unlikely to adversely affect Edinburgh’s accommodation industry but also that, handled correctly, it can help to secure the ongoing sustainability and health of tourism in the city.
Visitor demand is influenced by a complex mix of factors. Accommodation price is not the only, or the main factor, in determining visitor demand. Tourists also consider a destination’s overall appeal, affordability, the overall quality of the tourist experience, events, cultural and other attractions.
With its packed events and festivals calendar, historic city centre, free museums and art galleries and wealth of outdoor attractions, Edinburgh seems well placed in this regard.
The UK is one of the highest VAT taxed countries in Europe, but this is only one of the many taxes. Other fees and levies applicable to the accommodation sector make comparison between locations very challenging. Corporate income tax and personal income tax impacts on supply of labour, real estate taxes and business rates are all relevant to determining the total tax burden on the hotel sector to varying degrees.
While the total tax take may appear higher in some locations than others, many hospitality industries have thrived due to the public investment that tax take has contributed to. Therefore perceptions towards a tax among businesses can depend on how supported the industry feels by the public sector in sustaining the area’s tourism product.
We have looked at all local income-raising options including a Tourism Business Improvement District (a collection of businesses paying into a common pot to meet strategic aims) and a Cultural Heritage Fund.
There are clearly strengths and weaknesses to every option and we will continue to consider these. However, the alternatives don’t enjoy the same level of support as the TVL, mainly due to the lack of influence of local people in how the additional investment generated could be spent.
These models also may lack stability and certainty of revenue, which could lead to future financial pressures and undermine the city’s ability to make strategic investments.
The local market and the size of the different accommodation options available needs to be considered. We are aware that Edinburgh hotels make up more than half of the total accommodation market, but there is also emerging growth in the private letting sector, with companies like Airbnb at the forefront of this. An Edinburgh TVL should be fair to all, easy to understand, administratively efficient, and done in collaboration with the industry with a shared governance and transparent use of funds.
COSLA, the voice of local government in Scotland, have now added their collective backing to the debate. We will now continue the conversation with the industry, visitors and residents both informally and through further research and citywide consultation and then take our conclusion to the Scottish Government to formally request the powers to implement.
The case for a tourist tax isn’t a new one, but it’s a strong one. As is the growing body of public support behind it – indeed, an independent survey just this month showed more than half of Edinburgh residents are in favour.
We will continue to build a compelling case for the powers to introduce a transient visitor levy for the long-term benefit of our world-class capital city.
Adam McVey, leader, City of Edinburgh council.