Tourist tax Scotland: Why changes to the policy will benefit the rich

Good evening! This week's edition comes from Craig Dalzell, head of policy and research at Common Weal.

Sign up to receive the newsletter direct to your inbox every week here.

Whenever you hear a politician talking about introducing “tax bands” then I want you to hear the phrase “tax cuts for the rich”. Every time.

News broke last week that Scottish minsters were considering making changes to the incoming visitor’s levy (the tourist tax). Instead of tourists staying in Scotland paying the tax based on a percentage of their hotel bill (or the nightly fee for other applicable accommodation), the ministers were instead considering banding the fee in a manner similar to the Council Tax.

Under the scheme, there would be a flat fee within each band regardless of the actual hotel cost. The numbers are all hypothetical at the moment but to illustrate, imagine a tax that charged 5% of your room cost. If you stay a night in a £40/night budget hotel, that’s a tax of £2. If you stay a night in a £100 hotel, that’s £5 and if you book out the JK Rowling Suite at Balmoral Hotel, Edinburgh, in the middle of June this year at a cost of £2697 per night, you’ll pay a visitor levy of £135 per night. Breakfast is apparently included, so there’s that.

The ministers were presented one possible banded scheme that would charge a flat rate of £1 for rooms under £50, £7 for hotels under £200 per night and £9 for rooms costing more than that.

You can see the unfairness already. In our examples above, the person in the cheap hotel saves less than the price of a coffee, the person in the mid-market hotel sees their tax go up by 40% and the person booking out one of the most expensive hotel rooms in the country gets an instant tax cut of £126 a night.

Banded taxes with payment ceilings like this will almost mean a tax cut for the rich – which is why they and their lobbyists in the luxury hotel sector as well as the anti-land reform lobby are pushing hard for it. Isn’t it funny how readily governments are willing to listen to a very small group of rich people when they ask for a tax cut?

READ MORE: Tourist tax scrutinised as Edinburgh’s festivals seek exemption

The reason why it always means a tax cut for the rich is simple. The richest are so much richer than the rest of us that we never really seem to understand just how rich they are and they use that to their advantage. The top band in that tax proposal was for hotels costing more than £200 per night but that suite in the Balmoral costs more than 13 times that amount.

One of the “justifications” for this proposed tax cut for the rich is that it would take money out of local economies but this is patent nonsense. The folk at the very top of this market simply wouldn’t notice what would be to them a marginal supplement. And anyway, a tax going to local authorities is precisely money going into the local economy and helping to support local services.

There’s a reason, in fact, that so many tourist levies around Europe are not controlled by their regional governments (their equivalent of our “local” authorities) but by their municipal councils (think the size of Scotland’s community councils but much more powerful). That means that the money collected stays precisely where the tourists are putting pressure on those local services.

If places like Skye are being overburdened by excessive tourism, then it should not be for Inverness (much less Edinburgh or Westminster) to hive off the tourist tax revenue generated only to distribute it elsewhere. This, as is proven across Europe, is the perfect example of the most local of taxes.

Which brings us to the final important matter in this. It shouldn’t be for ministers in Holyrood to dictate whether this levy is proportional, banded or – indeed – a single flat rate. This is a local tax that should be entirely controlled by the people who collect it. If a local authority wants to make a bad decision with their tax and to give massive tax cuts to the rich, then that’s for them to answer to their electorate about, but that bad decision (or even a good one) should not be foisted upon them.

READ MORE: Tourist tax bill passes first legislative hurdle at Holyrood

As we often say about independence, the people best placed to make decisions are the people affected by them. That means that all of us should have our say about local taxes but also that none of us should have more say than our single vote allows. Ministers should encourage taxing people proportionate to their ability to pay but should give local government the control over their own taxes.

The ministers absolutely should not, once again, give in to lobbying from the richest among us who exert far more power than they democratically deserve to bring in tax cuts that benefit only them and hurt all of the rest of us.