The Highland Council's Proposed Visitor Levy

In 2024, the Scottish Government approved the Visitor Levy (Scotland) Bill, allowing individual council areas to introduce a fee or tax on overnight stays in some types of accommodation.

Dornoch BID Ltd is actively engaging with the northern BIDs, members of the tourism industry and politicians as part of the ongoing consultation period. Below you will find details of the proposed introduction of the Visitor Levy by Highland Council, our stance on the proposal and how you can help.

Members of the 5 Highland BIDs,  Chambers of Commerce and the Highland Hotels Association were invited to an Information Forum on 15 January 2025.  The Highland Council, Chamber of Commerce and Highland Hotels Association all gave presentations and a statement was read from the Scottish Tourism Alliance – A Q&A followed the speakers.

The event was recorded, and you can watch it in full at this link – https://www.youtube.com/watch?v=khaRNncBCg4

Highland Council’s Proposal

Dornoch BID Ltd’s Board has been very concerned about both the Scottish Government and Highland Council’s approach to introducing a visitor levy since we first learned of it in 2024.

In principle, we are not opposed to the concept of a Visitor Levy, but as we said to the Council in our letter of July 2024, in order to not damage the visitor economy, it needs to be:

  • Not adding materially to the cost of a holiday
  • A flat rate, not a percentage
  • Extremely easy for accommodation providers to implement
  • That all money collected should be spent as locally as possible

As it turns out, the proposed scheme fails on all of these criteria.

We polled our BID members on the proposal in December. A clear majority – 84% (91% of accommodation businesses) are against it:

Having listened carefully to the arguments, Dornoch BID believes this flawed legislation is actually dangerous for our town, whose economy largely depends on the visitor £.  We cannot afford to see businesses closing and young people losing their jobs. The Northern Highlands is facing a depopulation emergency, as too many young people have already migrated south for work. We cannot risk making the situation worse.

Please do read the following material and complete the Highland Council’s “Consultation” on this. 

Thank you,

 

Ginny Knox
Dornoch BID Chair, on behalf of Dornoch BID Board

VISITOR LEVY PROPOSAL: THE BARE BONES

  • Magnitude: 5% charge on all overnight accommodation in Highland (6% if VAT applicable)
  • Visitor Levy will be included in calculations of businesses’ turnover.
  • It is to be administered by businesses themselves via an “online portal” – which nobody has seen yet.
  • It is to apply year-round, in all parts of “Highland”
  • Key Exemptions: wild campers, motorhomes not staying in parks, cruise passengers, travellers and disabled.
  • No exemption for Highland residents “staying away” (for hospital, business or leisure) in Highland
  • Earliest implementation, Winter 2026
  • “Consultation” now closes end Mar ‘25
  • Will bring in £10 M in revenue for Highland Council, at an administrative cost (to them) of £550 k (5.5%)
  • Money to be spent on “Sustaining, supporting or developing facilities mainly used by visitors”. It will be aligned with the Council’s “Sustainable Tourism Strategy”
  • No provision for spending taxes collected in an area, IN that area.
  • ALL 74 Highland Councillors will get to vote Yea or Nae to this proposal – probably in May or June 2025. Our fate is in their hands.

WHY DORNOCH BID OPPOSES HIGHLAND COUNCIL’S VISITOR LEVY PROPOSAL

1.1.         The scale of this proposal – a 5% surcharge on accommodation – is the major issue.

This will harm the industry which employs the most people in Highland: Tourism.

– At a time when hospitality businesses are not in robust good health and when the Northern Highlands are dealing with a (de)population crisis

“With an average pre-covid visitor spend of £1.5bn in the region, 3,200 registered tourism businesses locally, and with tourism jobs representing up to 43% of the workforce in some areas of the Highlands and Islands, tourism is central to our way of life. It sustains many of our local, regional and island economies and communities”.  Source: HIE Website

Dornoch, in the Northern Highlands is one of the areas where Tourism is fundamental to the local economy – and has been for over a century. Anything which reduces the number of visitors coming to our town, threatens the town and its people.

If accommodation providers thought they could increase their prices by 5-6%, without impacting the demand for their product, would they not have done it themselves? In fact, the opposite is the case. Many Dornoch accommodation businesses in 2024, under pressure from the Cost of Living Crisis, have had to implement a cost decrease, despite ongoing inflationary pressures, (labour, NI, fuel, business rates, insurance, food, STL legislation) thereby shrinking their own profit margin. It has also been a bad year for cash-strapped domestic visitors, who have not turned up in the normal numbers – we fear this may be the first of several such years. Profit margins amongst accommodation providers are now extremely low to marginal.

Dornoch BID members know that adding 5/6% (post VAT) to their accommodation charges will depress their bookings. The alternative, swallowing the charge themselves, is even more unpalatable. Consequently, many of our members fear this tax will be the final straw which causes them to close.

Saffrey’s report, commissioned by Highland Hotels Association, models the impact on Inverness hotels of a 6% price increase – to be a 7% reduction in occupancy. Dornoch BID believes this impact would be amplified in the Northern Highlands, for reasons we expand on below. This would be a catastrophic blow for our economy, and that our own Government and Council could be responsible for such a blow, is shocking.

1.2.         If visitor numbers reduce because of this tax, as seems likely, the whole N Highland economy will suffer.

Visitors do not just spend money on accommodation! Whilst they are here, they visit shops and restaurants, golf courses and other visitor attractions. Indeed, in towns such as Dornoch, their expenditure is felt in every corner of our economy. If visitor numbers reduce by 7% because of this tax, businesses other than accommodation businesses may be looking to downsize or close their doors, resulting in more job losses.

1.3.         At the very least, this is a massive risk, which endangers businesses and jobs.

The Northern Highlands cannot afford this risk. We have many fragile communities and a rapidly declining working-age population. We are dealing with a “depopulation emergency”. (See Government’s “Action Plan to Address Depopulation” of Feb ’24) This tax risks the jobs of hospitality and other workers, potentially exacerbating our problems by encouraging even more working age people and their families to migrate south. 

The Council have not commissioned an independent Economic Impact Assessments into the likely impact of this tax. We believe this to be an essential precursor to the introduction of any such scheme, and its absence means introducing this tax is risky and reckless.

1.4.         Worldwide, Tourism taxes based on % ages, are designed to discourage overtourism

They are also eye-wateringly complex for businesses to administer.

In most parts of The Highlands – including Dornoch, we would like to encourage more visitors to come and enjoy what we have to offer. On the other hand, the main Highland problem with overtourism (motorhomes & wild camping around NC500) will be positively encouraged by this scheme!

Given that many accommodation businesses now employ dynamic (changing) pricing, numerous promotional offers and obtain bookings via a myriad of different online travel agents, it is entirely possible (for example) for all the guests staying in the 20 bedrooms in Dornoch’s Castle Hotel on one night, to be on a different tariff, some including “bundled” items. Imagine working out the VL submission!

A % scheme is therefore not fit for purpose.

No wonder that England and Wales seem to be looking at a fixed, low £/night visitor levy.

1.5.         This will be a financial & administrative burden for accommodation providers

The costs of administering the scheme for the Highland Council are said to be £550K pa. This seems high, but at least the Council will gain revenue against which they can offset the cost. There is no suggestion so far that accommodation businesses will be compensated for:

  •                 Increased OTA fees
  •                 Increased credit card fees
  •                 Required software/hardware amends
  •                 Increased time spent administering this tax for the Council

There is no discussion of how the scheme will work, except we understand it is to be by the businesses themselves, via an online portal. (How then can we be expected to give informed consent to this scheme?) As above, this will add to the administrative burden on many small businesses and will have a particularly adverse impact in the self-catering sector, where family businesses have recently had to implement the onerous and expensive Short-Term Let legislation and are also having to deal with changes to the Furnished Holiday Lets scheme. There are also some self-caterers in Dornoch (and therefore presumably throughout the Highland region) which are not online and whose owners do not even have an email address. It is a mystery as to how they will administer this tax. Maybe they will also just have to close.

1.6.         It is disingenuous to point to successful European schemes, saying this is similar

It is not. In Europe, VAT on accommodation is mostly around 10% (max 13%) whereas in the UK it is 20%. Also, European tourism taxes are normally a fixed rate of 1-2 Euros per night (as Wales are currently proposing at £1.25, and England mooting at £1). The effective rate of VAT + TT in Highland will be 26%, which will surely make us uncompetitively expensive.

The pre-Autumn 2024 visitor levy consultations undertaken by The Highland Council and Venture North before the details of the actual (punitive) scheme were unveiled are invalid, as respondents were free to imagine a benign, £1/night – type scheme, as encountered in many European countries. The scheme now being proposed is very far from this scenario.

1.7.         This tax is wrong in principle because it will discourage/disadvantage the very Visitors we want to encourage more of, while encouraging those we could do with fewer of (motorhomes, wild campers, cruise passengers).

An (unspoken) objective of the Council, would appear to be ameliorating some of the issues created by “wild camping” around the NC500, yet these visitors will not be subject to the tax, and it will likely encourage even more wild campers onto our roads, as the low budget alternative! This is wrong and needs to be addressed, ASAP.

1.8.         The Northern Highlands (including Dornoch) will be worse hit, as business here is so seasonal.

Because we only attract visitors in any number from April/May – Sept/Oct, our pricing is typically “expensive” in the Season, to help compensate for almost complete lack of revenue through the Winter. We do therefore understand the upper tolerance of our pricing policies very well. To make our prices more expensive still, is commercial madness.

This is a major difference to trends seen in Edinburgh, where visitors arrive year-round, and even to Inverness, where the Saffrey’s report shows a high level of hotel occupancy November – March, while Dornoch’s occupancy is very low.

1.9.         This may tip some businesses into crossing the VAT T/O threshold of £90,000. …meaning they will have to increase their prices considerably more than 5-6%, or voluntarily reduce their sales to stay below it. Another reason to shut up shop.

Why on earth is the Visitor Levy being included in VATable turnover?

1.10.      There is no clear plan for spending the money collected.

The “Sustainable Tourism Strategy” the Council refer to is full of good intentions, but vague. We fear the money may just disappear into the bureaucracy and some non-commercial projects, while the tax causes many good tourism businesses to contract – and others to close.

It would also be much easier to sell the concept of a visitor levy, if the money raised in an area was spent in that area, as we believe happens in many European locations, rather than just having it whisked off to Inverness.

1.11.      And finally, this Tax should absolutely NOT apply to Highland residents

 Who, because this region is so large, have to stay overnight in Inverness or elsewhere for hospital visits, to see friends or to do business.

This is mad and unjust.

1.12.      Dornoch BID believes the Visitor Levy Legislation as passed by the Scottish Government, with the levy based on a % charge, is fundamentally flawed and potentially a danger to the economy and communities of the Highlands. 

The Highland Council should not have proposed it in this form or at the high 5% level without forcing the Government to change the format of the legislation and without undertaking independent economic impact assessments (plural) – one for Inverness and one for the more fragile Northern Highlands, on the potential adverse impacts of this tax on such an important industry for the region.

A WAY FORWARD? – “PRESS PAUSE” AND SEEK ALTERNATIVE FINANCING

2.1.         The Dornoch BID would like to join with all 4 Highland Chambers of Commerce and 5 Highland BID’s in asking The Highland Council to push back to the Scottish Government, who should review and revise this deeply flawed legislation. Until that is done it should not be implemented in Highland, as it is just too dangerous.

Any Visitor Levy should be a small, fixed amount, rather than a percentage. As in Wales, and potentially England.

2.2.         In the meantime, we would ask for more concrete proposals from the Council as to how any future Visitor Levy moneys should best be spent. Ideally, the moneys collected in an area, should be spent in that area.

2.3.         The money the Highland Council are seeking to raise from this tax is relatively small, at £9.45M net of costs. Surely there is a case to be made to Holyrood that this sum could be granted to the Council as an acknowledgement of the unique challenges posed by the Highlands, with its small population, extensive road network and numerous visitors?

2.4.         Alternatively, could these funds not be sourced from the Renewables giants currently spreading windfarms and pylons across our countryside? They have large sums in community benefit funds….

2.5.         As our Dornoch Highland Councillor, Jim McGillivray says, “there is plenty of wealth in the Highlands – we should tax that wealth, not the meagre profit margins of accommodation providers”

PLEASE HELP TO PROTECT DORNOCH FROM
THIS DANGEROUS TAX

Fill in Highland Council’s online Consultation (Allow at least 15 minutes) https://consult.highland.gov.uk/kpse/event/36571DFB-0F00-4D02-B386-F77464ECE61A

Send separate emails to as many people on this list as you can bear to, with your views on the tax – if they are cc’d into one single email, they don’t pay nearly as much notice. (Again, we don’t want to give a template letter, as politicians tend to pay less attention to these). Please ensure you give the name and address of your business and say whether you are sending the email on your own behalf or somebody else’s.

You may well receive back a rather irritating, standard letter. But don’t worry, they will be counting their “postbag” on this issue!

MSPs

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Highland Councillors

Alasdair Christie (Councillor) [email protected]

Alex Graham (Councillor) [email protected]

Andrew Baldrey (Councillor) [email protected]

Andrew Jarvie (Councillor) [email protected]

Andrew MacKintosh (Councillor) [email protected]

Andrew Sinclair (Councillor) [email protected]

Angela MacLean (Councillor) [email protected]

Barbara Jarvie (Councillor) [email protected]

Bill Boyd (Councillor) [email protected]

Bill Lobban (Councillor) [email protected]

Isabelle Campbell (Councillor) [email protected]

Calum Munro (Councillor) [email protected]

Chris Ballance (Councillor) [email protected]

Christopher Birt (Councillor) [email protected]

David Fraser (Councillor) [email protected]

David Gregg (Councillor) [email protected]

Derek Louden (Councillor) [email protected]

Drew Millar (Councillor) [email protected]

Duncan MacPherson (Councillor) [email protected]

Emma Knox (Councillor) [email protected]

Glynis Sinclair (Councillor) [email protected]

Graham MacKenzie (Councillor) [email protected]

Helen Crawford (Councillor) [email protected]

Hugh Morrison (Councillor) [email protected]

Ian Brown (Councillor) [email protected]

Isabelle MacKenzie (Councillor) [email protected]

Jacqueline Hendry (Councillor) [email protected]

Janet McEwan (Councillor) [email protected]

James McGillivray (Councillor) [email protected]

John Bruce (Councillor) [email protected]

John Finlayson (Councillor) [email protected]

John Grafton (Councillor) [email protected]

Karl Rosie (Councillor) [email protected]

Kate MacLean (Councillor) [email protected]

Kate Willis (Councillor) [email protected]

Ken Gowans (Councillor) [email protected]

Laurie Fraser (Councillor) [email protected]

Leslie-Anne Niven (Councillor) [email protected]

Liz Kraft (Councillor) [email protected]

Liz Saggers (Councillor) [email protected]

Lyndsey Johnston (Councillor) [email protected]

Margaret Paterson (Councillor) [email protected]

Marianne Hutchison (Councillor) [email protected]

Matthew Reiss (Councillor) [email protected]

Maureen Ross (Councillor) [email protected]

Maxine Smith (Councillor) [email protected]

Michael Baird (Councillor) [email protected]

Michael Cameron (Councillor) [email protected]

Michael Green (Councillor) [email protected]

Morven Reid (Councillor) [email protected]

Morven-May MacCallum (Councillor) [email protected]

Muriel Cockburn (Councillor) [email protected]

Patrick Logue (Councillor) [email protected]

Paul Oldham (Councillor) [email protected]

Pauline Munro (Councillor) [email protected]

Raymond Bremner (Councillor) [email protected]

Richard Gale (Councillor) [email protected]

Ron Gunn (Councillor) [email protected]

Ruraidh Stewart (Councillor) [email protected]

Russell Jones (Councillor) [email protected]

Ryan MacKintosh (Councillor) [email protected]

Sarah Atkin (Councillor) [email protected]

Sarah Fanet (Councillor) [email protected]

Sean Kennedy (Councillor) [email protected]

Struan Mackie (Councillor) [email protected]

Tamala Collier (Councillor) [email protected]

Thomas MacLennan (Councillor) [email protected]

Trish Robertson (Councillor) [email protected]

William MacKay (Councillor) [email protected]