No room for change – tourist tax plans face block by MSPs

The city council is almost certain to need the permission of the Scottish Government to force hotels to pay for better marketing and reduce the cost to the taxpayer of the city’s festivals.

But the Scottish Government has told The Scotsman that businesses are already paying enough tax and that the British tourism industry has much higher VAT levels to cope with than those in other parts of Europe.

Senior councillors who want hotels to help pay for the staging of major festivals and events in the city, as well as marketing initiatives, have admitted they may need new powers to bring in such a scheme. The authority voted in favour of a bed levy or tourism tax scheme last week, with officials tasked with producing a report early next year.

Under the proposals, backed by all parties except the Tories, a levy of £1 or £2 could be added to hotel bills, as happens in other cities around the world.

An alternative scheme could see all businesses over a certain size asked to vote on whether to pay a voluntary extra levy on their rates on condition that it was ringfenced for tourism or marketing initiatives.

A spokeswoman for the government said: “We have yet to see proposals from Edinburgh city council, but there are no current plans to introduce legislation to allow local authorities to levy a tourism tax.

“UK government rules mean that tourism businesses in Scotland are already having to operate at a 20 per cent VAT rate when other European countries are reducing VAT for their hospitality sectors.”

The spokeswoman said that although the Scottish Government supported the concept of business improvement districts – like the one that already operates in Edinburgh city centre – it would need to see more detail from the council on how its tourism scheme would work.

Colin Paton, chairman of the Edinburgh Hotels Association, said: “This sounds like a perfectly sensible position for the government to take.

“They understand the pressures the hotel sector is under at the moment and also the importance of tourism to the economy. It seems obvious to me that they don’t want to put it at further disadvantage compared to other cities

“This is purely about a cash grab by the council to fill a black hole in its finances. I would wager their finances are in a worse state than many other cities around the UK.”

Tom Buchanan, the city’s economic development leader, said the council wanted to see the “hotel and leisure industry” in the city play more of a part in paying for festivals and events.

He said: “It is for local authorities to determine for themselves the resources they need to maintain the tourism industry in their areas.”