Edinburgh tourist tax: Minister guarantees council funding won't be cut to claw back visitor levy revenue

Scottish Government builds in ‘flexibility’ over priorities for spending tourist tax revenue

Legislation which paves the way for Edinburgh to introduce a tourist tax has been unveiled by the Scottish Government and welcomed by the city council.

The Visitor Levy (Scotland) Bill will allow local authorities to set and implement a percentage tax on the cost of overnight accommodation, including hotels, self-catering accommodation and campsites. Accommodation providers would be responsible for collecting the levy from visitors and remitting it to the council on a regular basis. And the revenue raised would have to be reinvested locally on "facilities and services substantially for or used by visitors”.

But the Scottish Government minister in charge of the policy gave a guarantee that council funding would not be cut to claw back revenue from a visitor levy. Edinburgh council has previously approved plans for a flat-rate tourist tax of £2 per person per night, capped at seven nights. And it has estimated such a levy would raise around £15 million a year. The levy amount will now have to be reviewed, given the legislation requires it to be a percentage rather than a flat-rate charge. A consultation in 2018 on introducing a tourist tax found 85 per cent of 2,500 respondents strongly supported the plan.

Visitors to Edinburgh face a levy on overnight accommodation once Edinburgh takes up the option offered by new legislation to introduce a tourist tax.

Launching the legislation, Scottish Government public finance minister Tom Arthur said: “Scotland is already a very popular tourist destination and the domestic and international visitors we welcome every year have a significant and positive impact on the Scottish economy. Giving councils the power to introduce a visitor levy is one tool that will provide additional resources to continue to attract visitors to Scotland. Levies on visitors staying in paid-for accommodation are already used around the world and it is reasonable for local areas to want a small contribution from tourists to help support and sustain visitor economies.”

Mr Arthur said the decision on whether or not to have a visitor levy would be for local councils. As part of the process they would have to consult with businesses and the wider community on how the levy could best be implemented and how the revenue should be spent. Edinburgh council has already said its priorities for spending the extra revenue would be waste, cleansing and improvements to public areas and greenspaces.

Asked if the Capital could use the tourist tax money to tackle the problem of overflowing litter bins during the Edinburgh Festival, Mr Arthur said: “The legislation creates a wide scope for facilities and services which support the visitor economy, so decisions around the implementation of a visitor levy and how that revenue is used will have to be consistent with the legislation.”

Councils will not have to seek ministerial approval of their levy schemes before introducing them and Mr Arthur would not be drawn on whether emptying overflowing litter bins came within the requirements. "This is a power for local government, so on the day we launch the legislation I'm not not going to start saying how councils should or should not use the power. We are clear that the revenue raised from this visitor levy should be used to support the visitor economy, but we also recognise there needs to be flexibility there. What is important for the visitor economy in Edinburgh will be distinct, perhaps, from what is important to the visitor economy in one of our rural or island communities.”

But Mr Arthur said the Scottish Government would not claw back the revenue raised from a levy by slashing their normal funding. "I am guaranteeing that,” he said. “This will be additional revenue – it will be revenue raised by a local authority and it will be retained in full by that local authority."

Although a tourist tax has been a long time in the making, it will still be a while before it can come into effect. The legislation must be passed by the Scottish Parliament and there will be a lead-in time to allow councils and businesses to prepare, meaning the earliest the government expects a levy to be introduced is the first half of 2026.

Council leader Cammy Day welcomed the new legislation. He said: “We’ve been building the case for Edinburgh to introduce such a levy for years so it’s great to finally see this Bill brought forward. We’re very proud that Edinburgh is one of the world’s most popular visitor destinations, but we’re equally aware that this success comes at a cost. That’s why we believe it’s right to ask visitors to make a small contribution to help us sustain and improve our tourism offer while managing its impact, and why we’ve been a key driver to see this legislation brought forward.

“A visitor levy is common practice in other major cities and destinations so why not here, in the place named ‘best city in the world’ to visit by Time Out magazine? From our citywide consultation held in 2018, our proposals gained overwhelming backing from Edinburgh’s residents, businesses and attractions – and, importantly, also from the majority of accommodation providers.

“Clearly, this model will need to be reviewed in line with the recommendations of the Bill so reshaping this with input from industry partners and communities is our next priority. It has been an extremely challenging period for our culture and hospitality industries so it’s more important than ever that we are fully committed to working together with them and other partners to co-produce a scheme that works best for the whole of our capital city.”