The Principles of a Local Discretionary Transient Visitor Levy or Tourist Tax

2. The balance between local autonomy and national consistency

This chapter sets out responses to the question covering how the design of a visitor levy should be set out.

The consultation paper notes that the pressures arising from visitor numbers and the challenges facing the tourism sector in Scotland vary across the country. It explains that the intention is therefore that a decision to implement a visitor levy will be entirely at the discretion of local authorities and should reflect local circumstances and priorities. There will be no obligation for any local authority to implement a visitor levy.

The consultation paper set out an initial position that there should be some overarching design principles set out in national legislation which must be followed by all local authorities that opt to introduce a visitor levy. Within this national framework the intention is to enable individual local authorities, working with local partners, to have as much freedom to take decisions as appropriate.

Question 1: Do you think that the design of a visitor levy should be set out:

a) wholly in a national framework?

b) mostly at a national level with some local discretion?

c) mostly at local level with some overarching national principles?

Please provide a reason for your answer.

Responses to Question 1 by respondent type are set out in Table 2 below.

The highest proportion of respondents, 42% of those answering the question, thought that the design of a visitor levy should be set out mostly at local level with some overarching national principles. Individuals were more likely to favour this option than organisations (50% and 31% respectively). The majority of Local authority respondents supported this approach.

A wholly national framework was supported by 36% of those answering. Organisations were much more likely to support this approach than individuals (52% and 24% respectively). Accommodation providers tended to favour this approach.

Only 22% of those answering the question favoured the design of a visitor levy being set out mostly at a national level with some local discretion.

Table 2

Question 1: Do you think that the design of a visitor levy should be set out:
Respondent type	a) wholly in a national framework?		b) mostly at a national level with some local discretion?		c) mostly at local level with some overarching national principles?		Not answered	Total
	N	%	N	%	N	%	N	N
Individuals	61	24%	64	25%	126	50%	24	275
Accommodation provider (hotel)	43		2		4			49
Accommodation provider (other)	34		10		17		6	67
Business organisation			1		3		3	7
Community council or residents' association			1		2		2	5
Heritage or culture organisation	3		3		4		2	12
Local authority	3		5		12		2	22
Other	2				1		2	5
Other representative organisation			1		3		1	5
Other tourism or hospitality business or organisation	3		1		3			7
Port authority	2				1			3
Professional body	2		4		1		3	10
Public body			1		1		4	6
Tourism and hospitality industry representative organisation	5		2		2		1	10
Tourism development or promotion organisation	5		2		3		1	11
Trades union, political party or campaign organisation					4		1	5
Total organisations	102	52%	33	17%	61	31%	28	224
All respondents	163	36%	97	22%	187	42%	52	499

a) wholly in a national framework

Many of the reasons given for supporting a wholly national framework centred around simplicity – in general, for visitors or for businesses.

For visitors, it was suggested that a national framework would be less confusing and that a consistent approach would be more easily understood. It was noted that many visitors to Scotland will travel across and stay in more than one local authority area and that variation between local approaches would be particularly confusing for these visitors.

From a business perspective, the focus was often on minimising the administrative burden on businesses and particularly on businesses which operate in more than one local authority area. There were specific references to simple levy collection processes and to keeping administrative overheads and costs down. Examples of problems for businesses of locally-based variations in approach to other national requirements were given, including that for alcohol licencing.

Other comments addressed the issue of competitiveness or fairness, sometimes referring to the need to create a level playing field for businesses. Associated points included that permitting local discretion could lead to competition between local authorities, creating a 'race to the bottom'. It was also argued that there could be a risk of unintended consequences in areas which use discretion to impose an inappropriate tax design.

On a similar theme, it was suggested that the principle of any visitor levy should be set out within a national framework to allow standardisation of the scheme and that this will prevent local authority areas being in competition with neighbouring authorities or those in different parts of the country.

There were suggestions as to what should be included within national framework, including:

• The introduction of efficient, cost effective and standardised administration processes.
• A clear and consistent definition of businesses that are in the scope of a visitor levy and also a definition of 'transient visitor' and who is liable to pay the levy.
• Prescribed purposes for which revenues can be used.
• The rate of levy set.

Finally, and to some extent across all options, some of the comments suggest that respondents had interpreted a wholly national framework as referring to a national visitor levy which would apply across Scotland. As the consultation paper notes, this is not what is proposed.

b) mostly at a national level with some local discretion

The themes raised by those preferring this option were often similar to those highlighted by respondents preferring option c) (mostly at local level with some overarching national principles).

For example, option b) was also seen as offering a balance between national consistency and preventing an overly fragmented approach across the country, with the exercise of local discretion informed by an understanding of the local context.

Other comments included that it would offer reasonable clarity, transparency of intention, help with building confidence in the concept of a visitor levy and in ensuring probity. It was sometimes referred to as being the fairest approach, including because it would help create a more level playing field or could ensure that any levy is applied across all accommodation providers and not just to hotels. A degree of national consistency was also seen as easier for visitors to understand.

Respondents also noted the importance they placed on there being a degree of local discretion, including to allow variations in the local context, such as high tourism numbers to be taken into account.

In terms of the elements to be covered by a national framework, suggestions included:

• The rate of levy.
• An administrative framework. A specific comment was that a consistent framework for reporting mechanisms and requirements in relation to information and payments etc. is more likely to minimise compliance burdens for businesses and administration costs for local authorities.
• Measures that would encourage revenue to be used for initiatives that improve visitor experience, the impact of tourism on the environment and that increase community access and participation.

In terms of the elements over which some local discretion should be exercised, suggestions included, contrary to the above, the rate of levy or the use of revenues.

c) mostly at local level with some overarching national principles

A common theme raised by those favouring this option was that any approach needs to offer enough flexibility to allow the varied requirements of each local authority area to be taken into account. Further comments included that each area will have a different socio-economic profile and will be subject to different infrastructure and other pressures. Given this, locally tailored responses, rather than a one-size-fits-all approach, were seen as important.

An often-connected point was that Scotland's tourism economy is also very diverse and that what might be appropriate for one area would not work in another. The differences between the most-visited locations, such as Edinburgh or parts of the Highlands, and areas with lower visitor numbers, were noted. In addition to the overall importance of tourism to the local economy, and the strength or otherwise of that tourism economy, respondents also referred to specific circumstances that will need to be considered. Examples highlighted included the volume of motorhome traffic, and decisions relating to cruise ships if the local authority area has a port.

It was suggested that local authorities will know their area best and are most suited, therefore, to make decisions regarding a visitor levy. This was sometimes framed in terms of the decisions as to whether a levy would be beneficial or damaging to the area and sometimes in terms of the design of a locally appropriate approach. It was also noted that decision-making at a local authority level ensures a degree of local accountability. A Professional body respondent noted that under the subsidiarity principle, a central authority should have a subsidiary function, performing only those tasks which cannot be performed at a more local level.

There was also a focus on decentralisation being a good thing and a view that decision-making should be devolved to as local a level as possible, including the suggestion that this should be to below local authority level. However, there was also a view that to go below local authority level would create a confusing environment for customers and businesses alike.

In general terms, reasons for supporting decision-making being mostly at a local level included that the impact of any decisions will be felt locally and that it will allow local businesses and communities to have a greater influence on the shaping of an approach that would work for them.

There were a number of specific references to the need for a tailored approach for islands. These references included the fact that cost bases for accommodation providers and the potential impact of a visitor levy were likely to be different compared to mainland areas. It was noted that these differences are likely to apply within a local authority that covers both island communities and parts of the mainland, and that a visitor levy will need to be tailored to market circumstances and local requirements in accordance with the principles of the Islands (Scotland) Act 2018. The importance of 'island-proofing' any visitor levy scheme was stressed by a Local authority respondent.

While many of the comments focused on the importance and role of local decision-making, there were also references to the importance of having some overarching principles to underpin any approach. Reasons given included that a degree of commonality would:

• Make it easier for visitors to understand the visitor levy.
• Help minimise the administrative impact on businesses which operate across local authority boundaries.
• Make it easier to hold local authorities to account.
• Help ensure that the approach speaks to, and is aligned with, other relevant national strategies or policy priorities, such as the Culture Strategy for Scotland.

Finally, some of the comments addressed which elements should be set out in overarching national principles and which should be within the purview of local authorities or at another local level. Many of these issues are discussed further below, including at Questions 6 to 9, but in summary suggestions for the former included:

• The rate of a visitor levy, or the maximum rate permitted.
• Any exemptions which should apply.
• The approach to collecting or paying the levy, including collection frequencies.
• A set of minimum standards and an accountability framework.

Suggestions for decisions best made locally included whether to apply a visitor levy, the rate at which a levy should be charged and how to use revenue raised.