How Could Proposed Edinburgh Hotel Tax Impact Visitors?

Last week, we reported on a proposed new hotel tax for the city of Edinburgh. Several news sources, including the Daily Mail, are now reporting that the tax has been declared illegal, but the Edinburgh Council is still looking to proceed with the proposal.

Fergus Ewing, Scotland's tourism minister, nixed the proposal to charge a £1 or £2 tax ($1.55 to $3.10) on beds in the Scottish capital, a move which could raise between $7.7 million and $15.5 million per year for the city. If the plan goes ahead, the Scottish city will be the first UK destination to tax visitors.

According to the Daily Mail, Ewing reportedly said that the Scottish Government has "no plans to introduce a bed tax, and there are no existing legal powers for local authorities to levy a local bed tax or tourism tax." He went on to note that the tax could damage the city's appeal as a tourist destination. "Price is a key threat to the competitiveness of the UK and unfortunately the UK ranks 135th out of 139 for price competitiveness." He also pointed out that all but three members of the EU have lowered VAT rates for hotel accommodation, and that the UK VAT rate on hotel accommodation is already 20 percent. "Some people would say we have already got a quasi-bed tax and it's called VAT," he said.

Precedent
In Italy, Insight Vacations has picked up the extra hotel tax in cities like Venice and Florence, and company president Marc Kazlauskas told Travel Agent that he has not seen a downturn in interest to those cities. "The general public is not aware of the tax," he said, though he acknowledged that travelers are aware of additional taxes in some hotels. "The sad part is when people return home and tell their friends, because that's when you see the impact." Customers on the fence about visiting a city might well decide to go elsewhere if they hear from friends that taxes are prohibitively expensive. "As governments have to find ways to pay for other things, they go after tourists," he said. "In the short term, it won't have much impact, but in the long term, it might." If people regard Edinburgh as a more expensive city than others in Europe, they may well opt for a different destination.

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