Waiting for the Levy to Break: Suggestions for the Hypothecation of Scotland’s Transient Visitor Levies

BEFS Board Member, Tyler C. Lott, provides a thought-provoking piece on the challenges and opportunities of Scotland’s Transient Visitor Levies.

In the past few years, the complicated relationship between the world’s love affair with Scotland and our desire to maintain and protect our localities from the impacts of overtourism has become strained, to say the least.  In 2019, the Scottish Government estimated that tourism contributes £7B annually toward the Scottish GDP and is responsible for one in twelve jobs. While we are privileged to be able to live in one of the most beautiful countries in the world, there is no doubt that a successful management plan must be enacted in order to protect our natural and built heritage and safeguard the quality of life for our residents.

In 2018, Edinburgh joined the ranks of cities plagued by overtourism and the overflow to other cities and areas throughout Scotland have felt the impacts as well. In February 2019, Edinburgh became the first British city to approve the introduction of a Transient Visitor Levy (TVL), commonly referred to as a tourism tax. In the year following, many other Scottish cities are following suit. Scottish law is expected to be introduced early this year, providing councils the authority to enact such levies if they deem necessary. As we await this outcome, it is imperative that we continue the conversation and prepare to move forward.

While conducting my postgraduate research on the legislation and regulation of short term lets in historic city centres last year, I studied eleven cities in total, including Edinburgh, London, Barcelona, Paris, Berlin, Amsterdam, New York, Los Angeles, San Francisco, Santa Monica, and New Orleans. Adding to the Scottish Government’s European focus, American cities were also examined in order to take into consideration any potential constraints within European standards or laws. Throughout the course of my research, it was determined that all cities studied, excluding Edinburgh and London, had an active tourism visitor levy enacted.

While some members of the public expressed concern over a TVL having the potential for negative implications on the tourism industry, research at present does not seem to support such a concern. In fact, major cities such as Los Angeles, New York, Paris, Amsterdam, and New Orleans are still experiencing record breaking years in tourism, surpassing annual goals, and continuing to welcome millions more visitors each year. While some concerns throughout the consultation were raised over enacting a TVL in addition to the present VAT, we must keep in mind that the UK’s current 20% VAT is 1.3% below the European average and 7% lower than Hungary, Europe’s highest. It’s also important to note that of the nine cities studied that are currently charging tourism visitor levies, six are also charging additional nightly occupancy taxes. The highest of these is Paris, which charges a 10% departmental tax and a 15% Paris Regional tax, in addition to the country’s 20% VAT. Despite this, the Global Cities Index revealed that Paris had the highest number of tourist visitors of any country in 2018, surpassing London for the first time in ten years.

Regardless of personal or professional opinions on the matter, Scottish councils are expected to be afforded the ability to enact TVLs within the coming year. As we await the results of the consultation, which closed for responses on 2nd December 2019, it is imperative that we continue the conversation and challenge ourselves to work out the practical implications and processes for moving forward. In doing so, it is important to take into consideration not only European precedence, but global precedence to ensure that constraints and trends within European law are duly examined. As the discussion remains open, it is important to note that such types of taxation are nothing new and that TVLs, in some shape or form, have been utilised on an international level since the 1940s and many major tourism destinations have enacted taxation on tourism effectively. The question is, what do we want these TVL to do for our councils?

As outlined in the European Commission’s Tourism Policy, the taxation of tourism for a specific purpose, including environmental, cultural, heritage, and social purposes is allowed and many cities within the EU have chosen to allocate revenue for varying related purposes. For example, Hamburg stipulates that revenue is to be invested in tourism, cultural, and sporting projects, while Malta stipulates its use for the maintenance of touristic zones. Other cities, such as the Lithuanian city of Palanga, require the revenue be used for much broader needs, such as the improvements of city’s infrastructure and marketing of tourism.

The Scottish government’s promise to allow local authorities to determine the needs of the locality can serve as a great tool for economic investment in our communities, however, for many countries such as France and Bulgaria that have hypothecated revenue for the purposes of infrastructure or tourism related investment, a greater risk of further perpetuating the problem needs to be realised.

Further, concern is raised over the overwhelming lack of hypothecation of revenue to the mitigation of tourism impacts on our built heritage assets – assets which are in many cases, the primary draw for tourism. While it can easily be argued that heritage could fall under any of the above listed categories, a definitive hypothecation of a portion of the revenue is the only way to ensure the appropriate funds are allocated to mitigate the impact of tourism on our precious and treasured heritage. Additionally, the establishment of an infused revenue stream for heritage-based assets can provide the opportunity to fund more local projects and reduce the stress of current grant-based funding. While the proposed Scottish legislation will allow the councils to determine if and how they enact these levies, I urge councils to hypothecate a certain portion of the funds for investment in our heritage while we still can.

Tyler C. Lott is a built heritage conservator and executive in based in Edinburgh, Scotland. Questions or requests for further information on her research should be sent to me@tylerlott.uk.