Edinburgh tourist tax: Scottish Government looking at new option on how to charge levy

Banding system proposed as alternative to percentage or flat-rate charge

Visitors to Edinburgh will face a levy on the cost of their accommodation - now it could work on a banding system. Picture: Lisa Ferguson

The Scottish Government is said to be looking at a new charging system for the tourist tax as MSPs prepare to begin detailed scrutiny of the legislation.

The Bill, which passed its first hurdle in the Scottish Parliament last week, currently proposes that councils who want to adopt a Visitor Levy should charge a percentage of visitors' accommodation costs. Many in the hospitality industry argued for a flat-rate charge instead.

And public finance minister Tom Arthur told MSPs the government would engage with councils and the tourism sector to consider the issue further.

But now a third option, a council-tax-style banding system based on room rates, is reported to be favoured by the government. The Sunday Herald said the proposal had been drawn up by the Scottish Tourism Alliance (STA) and ministers were "actively considering" the idea.

Examples were given of how the banding system would work, with accommodation costing up to £50 per night in the lowest band with a charge of £1 per night or £1.50 for two or more people; while a room costing between £200 and £400 might carry a levy of £7 per night; and the most expensive rooms could be taxed at £9 per night.

STA chief executive Marc Crothall argued the banding system would be "a more simple mechanism" than "having one place charge a percentage or another local authority just adding a flat £1".

Edinburgh is expected to be the first council to use the new powers to bring in a visitor levy once the legislation is passed, though April 2026 is likely to be the earliest date that could happen.

In 2019 the council agreed it would propose a flat £2 per night room charge, capped at seven consecutive nights. But the Bill launched last year required a percentage rather than a flat-rate fee.

Council leader Cammy Day agrees a percentage is fairer, rather than levying the same amount for a low-budget B&B and a five-star hotel. He has talked of the most likely rate for Edinburgh being between 3 and 4 per cent.

And he prefers the percentage approach to the latest idea. "I think it's clear for everybody. There's no bandings, there's no room price changes, it's just a simple straightforward percentage, which would be our preference. So while we are not against banding or tiering, I think it's more complex than a straightforward percentage that should be set by the city."

Lothian Tory MSP Miles Briggs said the STA banding idea seemed "more thoughtful" than the flat-rate or percentage options. The Conservatives do not support the Bill, arguing the levy threatens to damage Scotland's tourism industry. But Mr Briggs said the banding plan could be easier for small businesses to administer and should be looked at.

"The government hasn't really said what it wants to do as between a percentage and a flat rate and the local government committee couldn't come to a conclusion either. The suggestion from the STA is sensible and needs now to be looked at on how it would work."