Transient visitor levy: consultation

4. What Activity Should A Visitor Levy Apply To?

As described in chapter 3, the Bill will set out the activity or activities that a visitor levy will apply to.  This chapter explores and seeks views on a range of potential activities. 

4.1. Overnight Stays

The National Discussion highlighted that regions or municipalities within a number of EU member states apply a levy on overnight accommodation – see Annex B.

Overnight stays were the focus for much of the National Discussion.  We therefore envisage a visitor levy in Scotland would apply to overnight stays in commercially let accommodation. This would be the activity to which the visitor levy would apply, with the potential for it to be collected as part of payment for the accommodation. 

During the National Discussion, a range of industry stakeholders highlighted the importance of ensuring a level playing field across all types of accommodation.  These included self-catering units, including short-term lets that are part of the collaborative economy, hotels, bed and breakfasts, campsites, guest houses and marinas. It is therefore intended that the visitor levy would apply to overnight stays in all types of accommodation. 

Scottish Government is committed to legislating to provide local authorities with the power to apply a discretionary visitor levy.

Q2: Is an overnight stay in commercially let accommodation an appropriate basis for applying a levy on visitors?

Yes

No

Don’t know

Please provide a reason (or reasons) for your answer:

4.2. Additional Taxable Activities

The National Discussion surfaced some interest in exploring if other visitor activities could also be subject to taxation.  This is because a levy based on overnight stays in accommodation would not apply to the substantial numbers of visitors who do not stay overnight but who do use local services and have an impact on local environments, facilities and infrastructure such as roads, parks, toilets, parking and public attractions.  Views were expressed that a visitor levy based only on accommodation would disproportionately apply to one type of visitor, and would miss out others.  

At this time the Scottish Government is not minded to expand the visitor levy beyond overnight stays.  There would be significant practical difficulties with the application and implementation of this, and potentially a number of challenges to enabling it within the legislation.  However, we wish to explore both the desirability and feasibility of applying a visitor levy other than in relation overnight stays before making a final decision.  Other visitor activities that were suggested during the National Discussion were:

• Day visitors to a local authority area;
• Cruise ship visitors who disembark for a day; and
• Wild or rough camping, including motorhomes or caravans parked and occupied overnight in places that are not formal campsites or parking places.

Day Visitors

As day visitors also have an impact on local environments, and use many services and amenities, there was a view expressed during the National Discussion that they should also contribute towards the costs of those services and facilities. 

Whilst there are strong arguments in favour of taxing day visitors, it is difficult to envisage how such a levy could actually be applied and collected in a practical manner and in a way that distinguished between local residents and visitors.  For example, could a levy on day visitors be collected at the entry points to a particular area – for example pedestrian access to certain streets or at tolls to certain roads?  Other alternatives suggested in the National Discussion included applying a tax to goods and services used by day visitors such as restaurants or taxis.  In all such circumstances, the challenge would be distinguishing day visitors from overnight visitors and local residents. 

Cruise Ship Passengers

During the National Discussion, submissions from several local authorities indicated an interest in levying a charge on cruise ship passengers.  Similar to day visitors, cruise ship passengers may not stay overnight within the local authority area and in some cases, their expenditure and contribution to the local economy may be relatively limited.  However, the potential for cruise ships to disembark large numbers of passengers within relatively confined areas in a short time period may result in congestion, and an impact on local infrastructure over time.

If levying a tax on this form of visitor activity were thought to be important, the Bill would require to be extended to give local authorities power to impose a disembarkation or mooring tax for cruise ships at ports in their area.  

There may be a range of practical difficulties in operating such a tax effectively. In particular, the availability of alternative ports or harbours, the capacity for various ports to operate tendering services, and the scope to provide coach services between ports and attractions all open the possibility of activity being displaced between local authorities and potentially incentivise the avoidance of a visitor levy without reducing tourism pressures in particular local authority areas. 

This is demonstrated by recent experience in Amsterdam, which has this type of mooring or disembarkation tax. Amsterdam^[24] introduced a day tourist tax for transit river and sea visitors on boats that moor within the municipal boundaries of Amsterdam.  In response, some cruise ships are now docking in Rotterdam instead and transporting passengers into Amsterdam by bus^[25].  Initial anecdotal evidence suggests that this is potentially causing increased traffic congestion, air pollution and road maintenance costs. 

Wild or rough camping, including motorhomes and camper vans

Motorhomes and camper vans parked and occupied overnight in places that are not formal campsites or parking places are of concern to local authorities in some rural areas, such as the Highlands and Islands (including the North Coast 500 route).  There would be practical difficulties to applying, collecting and enforcing a tax on such activity, especially in remoter areas. 

We wish to explore if it would be feasible for a visitor levy to be extended to other visitor activities notwithstanding the challenges this might present (see section 4.2)

Q3: Which of the following activities do you think a visitor levy could be robustly applied to and enforced, and how? 

Tick all boxes that apply and provide reasons where possible

Day visitors not staying overnight

Please explain how a visitor levy could be applied and enforced on day visitors:

Cruise ship passengers who disembark for a day before re-joining the vessel

Please explain how a visitor levy could be applied and enforced on cruise ship passengers:

Wild or rough camping, including in motorhomes and camper vans

Please explain how a visitor levy could be applied and enforced on rough camping, including motorhomes and camper vans:

The Design of a Visitor Levy 

In chapter 3, we sought views on the overall balance of responsibilities between local authorities and central government.  In chapter 4, we proposed overnight stays in commercially let accommodation should be the primary activity that a visitor levy should apply to, and invited views on whether a number of additional activities should also be within scope.

In this chapter we explore further how a visitor levy on overnight stays might be designed and administered.  The answers to a number of the questions in this section may also inform the ultimate balance between local and national responsibilities.

4.3. Basis of Charge 

There are a number of different ways a visitor levy might apply to an overnight stay in commercially let accommodation.  Different approaches will impact on visitors differently, whilst also creating different administration and compliance concerns. 

The National Discussion noted that the basis for determining a levy on overnight stays varied in those countries that already operate a charge.  The broad options are: 

• Flat rate per person per night
• Flat rate per room per night
• A percentage of accommodation charge
• Flat rate per night dependent on the quality of accommodation

Flat rate per person per night

This would be a fixed charge levied on each individual staying in overnight commercially let accommodation regardless of the cost of the accommodation (for instance, £1 per person per night).  

The benefit of this approach is that it is relatively straightforward to explain to visitors, and to accommodation providers. 

However, the charge would be levied on each individual within a party staying in commercially let accommodation, regardless of the cost of that accommodation.  Those staying in low cost accommodation would pay the same as those in higher cost accommodation, this may be at odds with Adam Smith’s principle of proportionality.

A charge that is based on a per person basis also requires a definitive knowledge of how many people are occupying the accommodation.  Collecting this information is common practice in many European countries.  The Immigration (Hotel Records) Order 1971^[26] requires providers of accommodation in the UK to record the name and nationality of every adult using their accommodation.  However, the extent of compliance with this legislation is unclear, with anecdotal evidence suggesting accommodation providers often do not know who is staying in their accommodation. Requiring accommodation providers to record, at the very least, the number of people staying would in fact represent a shift in practice and might be difficult to enforce. The same anecdotal evidence suggested this is particularly so in self-catering accommodation where often only the name of the lead occupant is provided.

A visitor levy based on a per person charge may also be more difficult to levy in advance when a booking and payment is made and the exact liability, based on those actually staying overnight, may only be ascertained at the time of use.  

Flat Rate per Room per Night

This would be a fixed charge on a per room basis that is the same regardless of the cost of the accommodation.  It would have many of the same advantages and disadvantages as the flat rate per person.  However, as it is based on the room there would not be the same requirement to record the number of visitors using the accommodation which suggests this approach could potentially be easier to enforce.  

An extension of this approach applying to self-catering accommodation could calculate the levy on a ‘per key’ basis, meaning a single rate applied to accommodation of all sizes.  However, this could mean that in some circumstances persons staying in self-catering accommodation with more than one bedroom could be taxed less than if they stayed in hotel rooms and pay on a per room basis.

Percentage of Accommodation Charge

Under this option the levy would be calculated as a portion of the accommodation cost of a visitor’s overall bill.  As it is proportionate to the cost, it would be fairer than a flat rate per person or per room.  It would allow a levy to automatically reflect any seasonal adjustments to accommodation pricing, although it could arguably be a greater burden for single occupancies.  

A percentage charge would be seen as a more progressive levy and potentially more in line with the Adam Smith principles of taxation (see section 2.4).  An accommodation provider is likely to maintain records of all receipts for wider accounting and tax purposes, so ensuring compliance with a visitor levy charged as a percentage of the accommodation charge might be more readily achieved in retrospect.

A visitor levy calculated as a percentage of the accommodation charge may, in certain situations, impact on transparency, compliance and enforcement.  For example, we are aware that in some circumstances, typically when a booking is made using a third party platform, the client may not be aware of the split between the accommodation cost and the commission charged by the booking platform.  We also understand that it may not always be clear to the accommodation provider themselves how much of their own charge might apply to the cost of providing accommodation and how much relates to the cost of any meals provided.   

There may also be additional considerations for compliance and auditing as a result of price variation during the year, including where dynamic pricing models apply.

Flat rate per night dependent on the quality of accommodation

This would be a flat rate which would increase incrementally in bands reflecting the quality (star) rating of the accommodation.  This is potentially a more progressive approach than a simple flat rate per person or per night.  However it could be difficult to operate in Scotland as the current quality rating schemes in operation, such as that operated by VisitScotland, are not obligatory and may not cover all accommodation providers. A mandatory system of assessing accommodation quality would, therefore, have to be introduced for this to apply. 

We seek views from all perspectives, on each basis of charging described above. We also seek views on whether the basis of the charge should be determined nationally, or for a local authority to decide (although the decision on whether to apply the visitor levy or not would remain at the discretion of individual local authorities).

Q4:  The consultation paper sets out four options for the basis of the charge (section 5.1).  

Please tick which one you think would work best in Scotland? (Tick one box below)

Flat rate per person per night

Flat rate per room per night

A percentage of total accommodation charge 

Flat rate per night dependent on the quality of accommodation

Please provide a reason (or reasons) for your answer:

Q5:  In addition, for each option in Q4 what are: the considerations for accommodation users, accommodation providers and local authorities.  

Flat rate per person per night 

Implications for accommodation users:

Implications for accommodation providers:

Implications for local authorities:

Flat rate per room

Implications for accommodation users:

Implications for accommodation providers:

Implications for local authorities:

A percentage of total accommodation charge 

Implications for accommodation users:

Implications for accommodation providers:

Implications for local authorities:

Flat rate per night dependent on the quality of accommodation

Implications for accommodation users:

Implications for accommodation providers:

Implications for local authorities:

Q6:  Do you think that the basis of the charge should be set out in a national framework, or be for a local authority to decide?

Tick one box:

Set out in a national framework

Decided by local authorities

Don’t know

Please provide a reason (or reasons) for your answer:

4.4. Calculating the Rate 

This consultation is also seeking views on how the rate of the visitor levy should be set.  

Within EU member states operating visitor levies, there is substantial variation in the rates between municipalities operating a levy.  The rate set may influence consumer behaviour, though this will ultimately be influenced by the extent to which the levy is passed through to visitors.  Therefore, whilst consumers may tolerate a small increase in price, it will be important not to set the levy rate too high. 

A further consideration is that during the National Discussion, the impact of Value Added Tax (VAT) on the competitive position of accommodation providers compared to competitors in other countries. VAT is chargeable on holiday accommodation at the standard rate (20 per cent), although there is an exception for very small traders. Accommodation providers highlighted that all but one of the EU member states that operated tourist taxes applied lower rates of VAT on accommodation compared to the UK Annex B. 

It is likely that a visitor levy would form part of the total cost subject to VAT (i.e. VAT would be payable on the base price plus levy amount) as is the case in other EU countries where a similar levy operates. Scottish Government officials will continue to liaise with their counterparts in HMRC to discuss this treatment.^[27] 

Consumer sensitivity to changes in price is likely to vary in different parts of Scotland and depending on the time of year.  Understanding price sensitivity of tourists is a complex undertaking which depends on numerous factors including the nature of the tourism offer and its perceived uniqueness in the destination country (e.g. sun and sea versus cultural or sight-seeing) and availability of accommodation.  This would suggest that there could be advantages to the rate being decided locally based on local economic conditions.  Other factors, in determining price sensitivity, include the country of origin of the visitor (some visitors are more tolerant to price increases than others), income levels in the home country, exchange rates, and other factors. 

However, there may also be advantages in having a single national rate that applies to any local authority area which chooses to apply the visitor levy, providing transparency and avoiding any economically inefficient competition between areas. 

We therefore seek views on whether the rate of the visitor levy (in the context set out in chapter 3) should be set nationally or determined locally.  In either case, it will be important to ensure that the approach to calculate this is transparent, including, where possible, reference to ensuring the rate generates sufficient revenue without leading to negative economic impacts. 

Q7:  Do you think that the rate of the visitor levy should be set out in a national framework or should it be for the local authority to decide? 

Tick one box:

Set out at national level

Decided by local authorities

Don’t know

Please provide a reason (or reasons) for your answer:

If each local authority were able to determine the rate at which the visitor levy is charged, two further considerations arise.  Firstly, under certain circumstances, it could be possible for the choices made by one local authority to have a wider impact, for example, to cause a reduction in tourism activity across other parts of Scotland.  High visitor levy rates could also have broader reputational impacts on the perception of Scotland as a tourist destination and even, as a tax jurisdiction, which would not be in the overall interests of the Scottish economy.

This could be managed in part through a national upper limit or cap.  A national constraint on visitor levy rates set by local authorities would however conflict with local autonomy and decision making.  

The second consideration relates to how visitor levy rates are changed over time.  Local authority autonomy to change the rate over time would allow for closer alignment between rates and local market circumstances.  However, this could introduce uncertainty for accommodation providers and visitors, and increase complexity for both providers operating across local authority boundaries, and local authorities operating a levy.

As this consultation seeks views to inform the Scottish Government’s approach to balancing the conflicting objectives of local autonomy and national consistency, we invite views on what, if any, national oversight might apply if decisions about the rate of visitor levy were made locally.

Q8: What factors should be considered to ensure the rate of the visitor levy is appropriate? 

Please provide a reason (or reasons) for your answer:

Q9: If the rate of the visitor levy were to be set by individual local authorities, should an upper limit or cap be set at a national level? 

Tick one box

Set out at a national level

Decided by local authorities

Don’t know

Please provide a reason (or reasons) for your answer:

4.5. Exemptions

Following the National Discussion, we believe that some exemptions should be set out in legislation so that certain groups who might be negatively impacted by a visitor levy are adequately protected and that these exemptions should be enforced fairly and consistently across Scotland.  This national approach could be supplemented by allowing local authorities to apply additional exemptions to reflect particular issues within their areas.

There is great variety in the exemptions that are used in different overseas jurisdictions that have a tourism tax.  Most commonly, exemptions are given to people with disabilities and their carers, children under a certain age and homeless people.  

It is evident that the more exemptions that are offered, the more complicated the visitor levy becomes and the operational and administrative challenges for businesses that are required to collect and remit the levy are potentially greater.

However the Scottish Government is of the opinion that there are some groups for which it would be unacceptable for a local authority to impose a visitor levy on under any circumstances, and an exemption should apply.  These include the following:

Homeless people - homeless people might be housed in temporary accommodation, such as hostels and B&Bs, and as such they could be inadvertently subject to the visitor levy.  

Asylum seekers/refugees – asylum seekers/ refugees may be housed in temporary or “safe” accommodation, such as hostels and B&Bs, they could also be inadvertently subject to the visitor levy.  

Travelling communities (such as Gypsy travellers and other traveller communities) - using caravan parks and campsites for whom an exemption should apply where this is their primary residence.  

Victims of domestic abuse – where their normal home is unsafe for them to stay in, such persons may be placed temporarily in refuges or short term accommodation, where the visitor levy may apply. 

Those placed temporarily in refuges or short term accommodation because their normal home is unsafe for them to stay in – when a person is temporarily rehoused when their normal residence has, for example, been damaged by fire or flood or other circumstance, they could be placed in accommodation which inadvertently subjects them to the visitor levy.

A range of other groups that have been suggested for exemption are: 

• Disabled people and registered blind/deaf and their carers
• Those travelling out with their local authority area for medical care, and their carers or next of kin
• Children and young people under a certain age
• Students 
• Long stay guests (e.g. people staying for more than 14 days)
• Business travellers
• Local residents (paying for overnight accommodation within the area in which they reside permanently).

In general, operation of exemptions requires a means of determining eligibility, which in some cases could be difficulty to establish.  For example, some members of the population do not own identification documents (such as passport or driving licence).  It may therefore be more appropriate to exempt a whole accommodation type (for example all hostels).  However, this may mean that some visitors who use that type of accommodation, but are not in the exempt group would also avoid the visitor levy. 

The Scottish Government is of the opinion that there are some groups that it would be unacceptable to impose a visitor levy on under any circumstances.  These include:

• Homeless people
• Asylum seekers/refugees 
• Travelling communities (such as Gypsy travellers and other traveller communities) 
• Victims of domestic abuse placed temporarily in refuges or short term accommodation because their normal home is unsafe for them to stay in 
• Those placed temporarily in refuges or short term accommodation because their normal home is unsafe for them to stay in.

Beyond these groups, other groups could be included for exemption either at the national or local level.  

Q10: Do you think that all exemptions should be the same across Scotland and therefore set out in the national legislation, or should local authorities have scope to select some exemptions?

Tick one box below: 

All exemptions should be the same across Scotland and local authorities should not have any discretion. 

Some exemptions should be set at national level, and some should be at the local authority’s discretion

Q11: Which additional exemptions from the list below do you think should be applied to a visitor levy? 

Tick all that apply 

Disabled people and registered blind/deaf and their carers

Those travelling out with their local authority area for medical care, and their carers 

or next of kin

Children and young people under a certain age

Students 

Long stay guests (e.g. people staying for more than 14 days)

Business travellers

Local resident (paying for overnight accommodation within the local authority in which they reside permanently) 

Q12: Are there any other exemptions that you think should apply?

Please list together with reasons below:

4.6. Administration and Compliance 

The National Discussion raised a number of issues around the cost of administration, compliance with a visitor levy.  Administration costs in relation to taxes are generally considered to be the costs incurred by government in administering and collecting a tax, and compliance costs are those costs incurred by individuals and businesses in complying with the tax.  This latter category is distinct from the direct costs of meeting the tax liability.

Compliance Costs to Accommodation Providers

The Scottish Government heard a number of concerns expressed in the course of the National Discussion from businesses about the potential compliance costs of a new visitor levy on overnight stays by visitors.

Whilst we would wish to ensure that the compliance burden or costs are minimised, we are of the initial view that an efficient mode of operation would require the accommodation provider to be the person or entity liable for collecting and remitting the visitor levy.  The alternative, of making the visitor the liable party, would self-evidently create difficulties in recovering unpaid taxes once the visitor has left the accommodation.

This initial view reflects wider practice overseas although requires further consideration for circumstances where accommodation is paid for using third party agents, including internet based booking platforms.  Many such booking platforms routinely apply local visitor taxes on behalf of the accommodation provider and then remit receipts directly to the local or national government levying the tax.  Where these circumstances apply, we envisage the liable party or person would still be the accommodation provider who in effect procure a service from the third party booking platform or agent.  However, the alternative is that the accommodation provider collects the visitor levy on the overnight stay separately to any online booking. This is therefore an area we would welcome views.

Q13: What is your view of the proposal that accommodation providers should be ultimately responsible for the collection and remittance to the appropriate local authority, even if the tax is collected by a third party booking agent or platform 

Tick one

Agree

Disagree 

Please explain and provide any other comments on this proposal:

Whilst our objective is to minimise the compliance burden on accommodation providers, the Scottish Government recognises that businesses will need to adapt current booking and record keeping systems and adopt processes to collect the visitor levies and remit these to the appropriate local authority. 

In section 5.1 above, we sought views on differing means of establishing the basis of the charge, including around how an accommodation provider might calculate individual liabilities.  We would urge respondents to ensure any compliance cost considerations are included in the answers provided to the questions in that section.  That section also sought views on the implications of local autonomy or national consistency on compliance. 

In this section we seek views on additional considerations relating to what might be required of a business in collecting and remitting a visitor levy on overnight stays and how these impact on the compliance costs for accommodation providers. Our Business and Regulatory Impact Assessment (BRIA) will further develop our understanding of these compliance costs.

Q14: If accommodation providers were required to remit visitor levies after the overnight stays to which they relate (even if the payment was made well in advance) how frequently should the levies collected be required to be remitted to the levying local authority?

Tick one box

Ongoing basis (e.g. each night)

Monthly

Quarterly

Annually 

Please provide a reason (or reasons) for your answer:

It will be necessary for accommodation providers to collect information from visitors to apply the visitor levy correctly and retain records to demonstrate compliance.  This information may vary depending on the basis of the charge.  It will be essential that local authorities and accommodation providers comply with General Data Protection Regulation (GDPR) in handling personal data.

Q15: What information should an accommodation provider be required to collect and retain to ensure compliance?   

Please list below and explain why you think that information is needed for the four different scenarios below:

If the basis of the charge is on a:

a) flat rate per person per night

b) flat rate per room per night

c) percentage of total accommodation charge

d) flat rate per night dependent on the quality of accommodation 

Local Authority Administration and Enforcement

If accommodation providers are responsible for collecting and remitting a visitor levy, the local authority must be able to receive such payments.  It would require to know which businesses, premises or individuals should be remitting receipts and have powers to enforce the legislation.

It will not be possible to identify every business providing overnight accommodation from the Non Domestic Rates valuation roll or Council Tax valuation list. Furthermore, the recent Scottish Government consultation on potential new regulatory approaches for Short-Term Lets^[28] highlighted that there is not, at present, any registration or licensing regime that applies to such properties. Consequently, a primary challenge for a local authority will be to ensure it is able to establish which businesses, premises or individuals it would be expecting to receive collected levies from and have systems in place to receive and record levies remitted, including the ability to attribute remittances from third party agents and booking platforms. 

It is therefore likely that local authorities choosing to apply a visitor levy will need to create, operate and maintain a record of accommodation providers within their area. This might for example, be based on self-declaration by accommodation providers. No policy decisions have been made in relation to the regulation of short-term lets and this consultation document reflects the current regulatory regime, although any changes to the arrangements for such properties may be a consideration for any local authority choosing to apply a visitor levy in the future. 

Overall, to ensure compliance, a local authority is also likely to need powers to support enforcement actions appropriate to all accommodation types, for example to obtain relevant information and apply proportionate penalties where necessary. 

Q16: How can a local authority choosing to apply a visitor levy ensure it has a comprehensive list of all those providing overnight accommodation on a commercial basis in their local authority area?

Please provide a reason (or reasons) for your answer: 

Q17: What enforcement powers should a local authority have to ensure compliance and prevent avoidance and evasion by accommodation providers?

Please provide a reason (or reasons) for your answer:

Q18: Should non-compliance by an accommodation provider be subject to a civil penalty (i.e a fine) and if so, what would be the appropriate level be?

Tick one:

Yes

No

Don’t Know

Please state level of civil penalty (fine) (in £ pounds sterling) that you think is appropriate?