Fiona Hyslop rejects plans for an Edinburgh tourist tax

The Scottish Government has moved to kill off hopes that a controversial bed tax would be imposed on tourists to help protect Edinburgh's festivals and events from the impact of funding cuts.

Visitors to Edinburghs festivals will not face a bed tax. Picture: Lisa Ferguson

Scottish tourism and culture secretary Fiona Hyslop has said the proposed scheme “doesn’t make sense” because of the damage it would cause the tourism industry.

Ms Hyslop said “smarter” alternatives would have to be found because Scotland is already subject to the second highest VAT rates in Europe.

She has spoken out weeks after a survey found four in five small firms in Scotland were against any form of tourism tax being introduced.

The study, conducted by the Federation of Small Businesses, also found that 88 per cent of tourism businesses in Scotland were opposed.

Last month Shona McCarthy, the new chief executive of the Edinburgh Festival Fringe, said she was opposed to the principle of a bed tax being used to make up for cuts. She instead urged a complete rethink of annual reductions in funding, which she warned could have a “devastating” long-term effect.

However, a host of the capital’s leading cultural venues and arts organisations have previously backed the idea, with money raised being “distributed across this essential infrastructure which underpins Edinburgh’s international reputation for culture”.

Edinburgh City Council, which has been leading calls for some form of levy on visitors to be introduced, has proposed cuts of 10 per cent to the festivals and arts groups it supports over the next four years.

Creative Scotland has had a 3.6 per cent cut in the money it receives from the Scottish Government, but has protected long-term funding for Edinburgh’s festivals ahead of their 70th anniversary in 2017.

In an interview in Holyrood Magazine, Ms Hyslop said: “Scotland has the second highest VAT payable for the tourism industry. In that context, trying to put extra taxation on them doesn’t make sense.

“I agree with the cultural sector we need more investment to help support the infrastructure in our cities, of course we do, but there are smart ways of doing it. That’s what I want to do as part of my brief, to look at smart ways of getting investment we need, but do it in a way which doesn’t hammer the tourism industry.”

A spokesman for the FSB said: “These comments are a clear signal from the Scottish Government that local authorities will not get carte blanche to impose new taxes on what is a vital sector of the economy.”