THE FEDERATION of Small Businesses (FSB) has responded to a consultation on Edinburgh’s visitor levy, saying that spending it on housing cannot be “justified”.
They state that the revenue from the tax should be spent on supporting tourist infrastructure rather than being used primarily on housing and participatory budgeting.
This comes after Scotland’s tenants’ union, Living Rent, urged the council to spend the levy on building more affordable housing, to alleviate the city’s current housing emergency.
The Visitor Levy (Scotland) Act, passed in May 2024, allows councils in Scotland to tax overnight accommodation if they wish to do so, and the council are currently undergoing a 12-week public consultation on the matter.
The tax could raise up to £50m a year, with the council planning to use £5m of that to borrow £70m to build more affordable housing in Edinburgh.
Living Rent have argued that this isn’t enough and demand a “Tourist Tax for Council Flats” as 23,000 people are currently waiting for a permanent council house.
The organisation is also arguing for an increase on the nightly tax from 5% to 8%, similar to Amsterdam and Porto.
Currently, 2% of funds from the levy will be used on participatory budgeting, with half of the remaining revenue to go towards infrastructure, and 10% towards tourism marketing.
FSB, Scotland’s leading business organisation, has stated in a consultation response released last week, that the “Visitor Levy can be ‘a force for good’ if delivered in the right way”.
They noted that many of the businesses asked to collect the levy are B&Bs, guest houses and small hotels.
They state that: “Many currently operate below the VAT threshold and do not have the same capacity as the multinational chains to administer the levy.
“The council needs to pay very close attention to these businesses and make sure it gets it right for them.”
Regarding where the revenue from the levy will be spent, the FSB emphasised that the money should go towards developing facilities which receive large amounts of tourism.
They said: “Sections 13 and 19 of the Visitor Levy (Scotland) Act state that proceeds from the levy should be spent on ‘developing, supporting or sustaining facilities or services which are substantially for or used by persons visiting the scheme area for leisure or business purposes (or both)’.
“Given this statutory direction, it is difficult to understand how the council’s decision to prioritise spending of revenues on housing and participatory budgeting can be justified.
“The spending headings of ‘City Operations and Infrastructure’, ‘Culture, Heritage and Events’ and ‘Destination and Visitor Management’ do match the priorities of the business community, as expressed in FSB’s Big Small Business Survey 2023.
“These should represent the core spend from the levy, not the residue.”
Concerns have also been raised regarding the use of the levy to pay for work that should be part of existing tax structures.
The FSB said: “It has been suggested by the council during consultation events that this could include work such as removal of graffiti or street repairs, yet these seem to be part of the existing core council services that businesses should already expect in return for their taxes.
“Any funding applied from the Visitor Levy should demonstrate clear additionality over core council services.”
The FSB concluded by saying: “Enhancing our tourism infrastructure is a clear priority for business, as is investing in culture, heritage and events, destination and visitor management.
“Spending in these areas should be clear and demonstrably additional to the council’s existing duties and responsibilities and should be prioritised over plugging gaps in the city’s housing budget or diffusing cash to community councils.”
