By Colin Marr, Chief Executive, Inverness Chamber of Commerce
This week, Highland Council published the results of the public consultation on the proposed visitor levy (often referred to as a tourist tax), which ran from November 2024 to March 2025. They also released the findings of the independent economic impact assessment that we, along with other business organisations, had been calling for over several months.
The good news is that both pieces of work are comprehensive and genuinely independent.
Towards the end of last year, the Scottish Government confirmed that it would revisit the visitor levy legislation and amend it to allow councils to charge a flat rate rather than a percentage of the room price. We were pleased when Highland Council agreed to pause its work on the visitor levy until that change has passed through Parliament. Once the legislation is amended, the Council has committed to re-drafting its scheme, taking account of the consultation findings, and consulting again on a revised proposal.
In that sense, the results of the 2024/25 consultation and the economic impact assessment have been overtaken by events. However, they still provide valuable insight.
The consultation was wide-ranging, with more than 4,000 responses from businesses and individuals. In almost every area, the findings closely matched the position taken by Inverness Chamber, alongside the three other Highland Chambers of Commerce. Given that we represent a large number of Highland businesses, this alignment is not surprising.
In particular, the consultation showed that:
- There is majority support for the idea of a visitor levy, but very little support for the model that was proposed. This view was shared widely and not limited to specific sectors.
- The levy is being considered at a time when the tourism industry is already fragile, and when the overall tax burden on businesses is high compared with European competitors. As a result, the levy could have a much bigger impact than expected.
- There is little support for a percentage-based charge and a strong preference for a simple flat fee.
- There is serious concern about the complexity of collecting the levy.
- There is strong support for exemptions for Highland residents.
- The proposed timetable is too ambitious and should be delayed until the national collection portal is proven to work properly.
- The proposals for how levy income would be spent are not yet clear enough.
The economic impact assessment estimates that a 5% levy could raise more than £15 million a year. That is a striking headline figure, and one the industry could support – if there were clear and credible guarantees that the money would be spent on tourism infrastructure and on promoting Highland tourism businesses.
However, there are some important details beneath that headline.
The report assumes that after the first year the full cost of the levy would be passed on to customers. In practice, that means a 5% levy would lead to a 5% increase in accommodation prices. The analysis then suggests that this price rise would result in a fall in demand of around 3.75%. If that proves to be accurate, Highland Council could raise more than £15 million a year, but at the cost of a noticeable drop in visitor numbers. That would not just affect accommodation providers, but also restaurants, bars, attractions and shops that depend on tourism.
The report also recognises that the cost of collecting the levy would hit smaller operators hardest, as they do not have large finance teams or systems. For an accommodation provider with fewer than five rooms, the cost of collection in the first year is estimated to be close to £1,500.
Finally, the assessment suggests that the amount of accommodation available could fall by around 5% as a result of the levy. This could happen if some businesses close, or if others reduce the number of rooms they make available, for example to avoid crossing the VAT threshold. That reduction could mean up to £1 million less being raised than the headline figure suggests, alongside fewer visitors coming to the Highlands and a knock-on impact across the wider tourism economy.
Looking ahead, the pause in the visitor levy process gives us a real opportunity to get this right. The consultation and the economic assessment both underline the need for a simpler, fairer approach that supports tourism rather than risks undermining it. Inverness Chamber stands ready to work with Highland Council and the Scottish Government to help shape a revised scheme that is practical for businesses, fair for visitors, and delivers clear benefits for our communities.