ICAS responds to transient visitor levy (tourist tax) consultation
By Justine Riccomini, Head of Taxation (Scottish Taxes, Employment and ICAS Tax Community)
10 December 2019
On 9 September 2019, the Scottish Government issued a consultation on tourist tax or transient visitor levy (TVL). The consultation closed on 2 December and Justine Riccomini takes us through the key issues.
Background
ICAS has been involved in the policy talks of implementing a TVL with the Scottish Government since the idea was first mooted. After participating in talks with the Scottish Government on 31 October, ICAS has now responded to the consultation document issued in September, concentrating on the operational taxes aspects.
The levy
The intended charge is understood to be proposed on “commercially let accommodation” which involves not just hotels and B&Bs, but also properties let by individuals using booking platforms and apps such as Booking.com and Air BnB. Other providers, from campsites to cruise liners, may also be liable for the charge.
Local or national?
ICAS has said that any levy ought to be based on a broad national policy, but offering local rate setting opportunity as befits each area according to its circumstances. This should help provide ease of operation for businesses and prevent confusion amongst stakeholders and taxpayers (with the same policy, processes, forms etc), whilst allowing local authorities discretion in the amounts charged. All of this is in the context that Scotland should be seen as a welcoming place to visit.
As with any taxation regime, a dispute resolution mechanism should be legislated for to allow for an appeals and escalation process.
Definitions are vital
ICAS has requested that terms such as “commercially let accommodation”, “tourist”, “tourism”, “overnight” etc. are fully defined in any legislation and examples provided in accompanying guidance.
ICAS considers that as much legislation as possible should be within primary legislation. Careful thought needs to be given to which parts of the local and national elements of this tax should be placed within primary legislation and which are placed in accompanying guidance.
Business burden?
Given that it will be the businesses in the tourist industry which are relied upon to collect the tourist levy, burdens on business need to be kept to a minimum, where possible. It is widely acknowledged that the public finances are already heavily dependent on the work carried out by businesses in their capacity as unpaid tax collectors.
Keeping it Simple
The role of tax reliefs in any tax system needs careful evaluation. As a general principle ICAS supports a broad base and consistent low rates without a widespread use of tax reliefs, which add to complexity and hence administrative costs. Careful consideration needs to be given to proposed new reliefs.
Hypothecation, or into the general tax pot?
To ring-fence a tourism tax and spend it only on tourism-related improvements and services may seem limiting for the local authorities concerned, who may be able to better utilise the revenues raised on other priority items as it sees fit.
However, the tourism industry may not see it that way. It is clear that, if the Scottish Government priority is for this revenue to be spent on tourism, a form of definition needs to be placed upon the term ‘tourism’ for this purpose.
Local authority funding and accountability
Local authorities will need to demonstrate accountability for the additional revenues raised and impact assessments, with a form of reporting of this put in place. Local authorities must also be able to demonstrate that the levy is meeting its objectives. In addition, there is the question of whether local government funding may need to be re-configured and thought given to the national balance of allocations from the Scottish Government.
Conclusion
Further information on this matter will become available once the Scottish Government has reviewed the consultation responses and set out its views on how it proposes to move forward.
The ICAS consultation response can be found here.
