Hospitality businesses have demanded Highland Council not just pause the roll out of the proposed visitor levy but they want the Scottish Government directly challenged over the legislation – like during the deposit return scheme debacle.
Visit Inverness and Loch Ness tourism BID staged a meeting at Eden Court this afternoon to allow businesses from across the region to voice their concerns about the visitor levy – also known as the tourist tax.
The council has indicated a tourist tax at 5 per cent could raise £10 million a year.
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The consensus feeling at the meeting was that the levy on top of the Labour government’s massive National Insurance hike, combined with the number of overnight stays in the region declining for two years in a row, is too much for the sector.
Ranging from those who operate large-scale accommodation like the Kingsmills Hotel in Inverness to those such as the crofters renting out their own property – the issue came back to firms’ narrowing financial margins.
The concerns expressed ranged over the proposals themselves, the legislation that it is based on and the ongoing consultation. There were fears about the impact on the north tourist sector and that the council’s proposal is a “done deal”.
Inverness Chamber of Commerce CEO Colin Marr – who was also representing the Caithness and Lochaber chambers of commerce and Cairngorm Business Partnership – was joined by Craig Ewan from the Highland Hotels Alliance while addressing an audience of around 80 people.
A tax on a tax
Mr Marr spoke for many in the room when he said the Scottish Government’s legislation for the levy is “fundamentally flawed” and he is “convinced that it will do the tourism sector more harm than good”.
He argued that because of the way it was set up at the legislative level it effectively means that it is a tax on a tax as he came straight to the point asking: “But most importantly, what is wrong with the proposal?
“The accommodation sector in the Highlands is suffering. Room occupancy has fallen for the last two years and independent estimates are that hospitality inflation is currently running at around eight per cent.
“That means that profits are significantly down as prices can’t rise fast enough to maintain margins. The UK Budget increased employers’ National Insurance burden for every business.
“If there were tourism businesses that were able to pay this levy they disappeared when that Budget came in in October.
“In the Highlands when you move beyond Inverness, our providers are heavily affected by seasonality and are heavily affected by fuel costs, much more so than the rest of Scotland, so margins are much tighter.
“The levy – and again please remember this bit is the Scottish Government, not Highland Council – has to be included in room rates and in business turnover but what that means is that the levy is subject to VAT.
“I can’t think of another tax which has taxes on top of it. It also means that the levy counts towards the VAT threshold for business.”
An ‘existential crisis’ for accommodation providers
Picking up that point, Clare Winskill who owns Coruisk House on Skye, said smaller operators who go over the £90,000 threshold making them eligible to pay VAT will be disproportionately affected by the levy.
She said: “VAT is a huge problem particularly for small accommodation operators where I’m from. So for example, the business impact survey that I carried out showed that 35 per cent of the responders would be pushed over the £90,000 VAT threshold.
“That would essentially mean that they would go from not paying any percentage except income tax to paying 26 per cent – so it’s 25 because of the one per cent on the levy.
“So for businesses like that it makes them not viable in the current economic climate, it would be almost impossible to survive. I think all the senior councillors should have been here – this is an existential crisis”.
Visitor levy is an ‘opportunity’
Representing the council and answering questions were assistant chief executive Malcolm Macleod and Sheila Armstrong, the chief officer for revenues and commercialisation.
Mr Macleod started with a presentation essentially aimed at underlining that far from being a done deal – as some worried – the local authority actively wanted to listen to the sector and incorporate its views.
However, that came with the caveat that he would also have to incorporate the views of communities across the Highlands, including those who are in favour of the levy as a way to support infrastructure investment.
He was called on to repeatedly deny that the policy framing has concluded and that the consultation is a box-ticking exercise – which he did time and again, and in which he was supported by Mr Marr.
In his presentation, Mr Macleod pointed out that there has been a 64.7 per cent increase in visitor numbers across the region between 2012 and 2023, adding: “A visitor levy could offer real potential to generate change in the ways we manage visitors and support our tourism industry.
“The council recognises the need and value of working together with the communities and businesses to deliver solutions in managing the visitor economy.
“A visitor levy could support additional opportunities for collaboration and co-investment with partners to propel shared ambitious growth objectives”.