Tourism Tax – Will it help or hamper small tourist businesses?

Several cities, including those in the UK and the EU, are considering introducing a tax on visitors.

There are major implications for introducing such a tax, with many hailing it as a great way to raise much-needed revenue for investment hotspots.

On the other hand, there is scepticism surrounding whether the tax might deter tourists from visiting their city or reduce their spending within local, independent small businesses.

Earlier this month, the Scottish Government confirmed Edinburgh could be the first UK city to introduce a “transient tourist levy.”

Under the proposed legislation, local authorities could be given the power to tax visitors to Edinburgh.

The legislation is set to be put before the Scottish Parliament in 2023. However, if passed, any levy would not be introduced until 2026 at the earliest.

Edinburgh City Council has campaigned for the introduction of such a levy since 2018.

At first glance, it might seem like a great idea to introduce a tourism tax. It would create additional fiscal flexibility and raise an estimated £15 million a year.

This could then be reinvested in sustainable tourism along with managing the impact of tourism on the city.

Several European cities already charge overnight visitors and cruise ship passengers a levy, including Amsterdam, Rome, and Venice.

What might the implications of introducing a tourism tax be?

Generally speaking, tourism tax is a contentious issue worldwide.

Many are in favour of these taxes and levies, as it is a relatively easy way for cities or even whole countries to raise additional revenue.

They see this as a way for the tourism sector to flourish, with the money raised being reinvested back into local infrastructure that supports communities and businesses.

On the other side of the debate around tourism tax, others deem this sort of levy unnecessary or even detrimental to the sector – driving away visitors or limiting their spending during their visit.

For example, there was talk of Bath imposing a “tourist bed tax” back in 2017, but this has since been shelved due to similar concerns.

Would a tourism tax be effective?

Small UK tourist hot spots like Burnham-on-Sea in Somerset or Edradour in Perthshire, might not be as attractive to tourists if they impose a tax.

As discussed, any tourism tax would need to be factored into a visitor’s budget, which in turn could put them off their trip as their holiday would be more expensive.

The question of whether a tourism tax would be effective or not hinges on how it would be imposed, how much it would cost, and under what conditions the tax would be imposed, i.e for an overnight stay or longer-term stays.

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