reprinted from:

Taxing times could lie ahead for Scottish tourism

By Keith Aitken
Copyright 2001 The Scotsman Publications Ltd.
Article date: November 11, 2001
 

The notion that every idea has its time has always seemed distinctly suspect. It provides unwanted encouragement for the dim and deluded, and a soft excuse for the plain wrong.

On the other hand, the reverse certainly does apply: inappropriately timed, the best idea in the world can sound perfectly daft.

Given the well-founded mood of crisis surrounding the Scottish tourism industry, it is hard to imagine a less apposite time to ponder a new tourism tax. Which is why it was irresistibly intriguing last week to find three serious figures from the industry floating just that idea. Roy Wood and Gordon Barron, both from Strathclyde University's Scottish Hotel School, and Turnberry hotelier Bill Kerr, stop short of explicitly committing to the proposal, in their paper for the journal Scottish Affairs.

Well, such is the privilege of the academic and there's no denying that, on past evidence, the hospitality industry actively loathes the idea. The current wrack of foot and mouth, an overvalued pound, an imploding tourist board and September 11 has probably not made minds any more receptive.

Yet taxes rarely waft into being on the warm endorsement of business. The authors are bold enough at least to explore the idea dispassionately. That alone should commend their paper to an industry as short of ideas as of investment, and currently confronting adversity with all the calibrated imagination of a decapitated bantam.

Besides, there are grounds for believing that a tax, properly positioned, might actually help. Properly positioned means properly, and above all transparently, hypothecated.

When the idea of a so-called 'bed tax' was last tossed into public debate two years ago, by Glasgow tourism panjandrum Eddie Friel, the argument focused mainly on how much harm it might do. That's an important topic, but so is how much good.

Two truths need to be kept firmly in sight. First, Scottish tourism's decline has been long-term, not just attributable to recent exceptional misfortunes. Second, the steady fall in revenues has run against the trend for the UK as a whole. What that conveys is that there is probably something inherently wrong with both the product and how we sell it.

To which the industry would instinctively reply that you don't address that by increasing costs. This was the argument robustly deployed last time around, when a 2% levy on hotel bills was mooted - and rightly dismissed - as a means of financing Scotland's woefully undynamic Area Tourist Board network.

Suppose instead that the proceeds were channelled into strategic training and investment. Not just in bed-and-board and those ghastly fibreglass fiascos with 'experience' in their titles: it could also help improve the peripheral services that so affect how visitors see us: surly publicans, monoglot taxi drivers, child-phobic restaurants, understocked gift shops, filthy lavatories, littered streets and other such rare delights of la belle Ecosse.

Wood, Barron and Kerr posit some other potential gains: that a bed tax might conceivably help weed out low-quality accommodation; that it is progressive, in that the better off pay most; and that outsiders mostly pay while locals benefit. Fine. But what of the big worry: that the cost would either have to be absorbed in already minimal margins, or passed on to an already evaporating customer base?

The authors tour the available research and judge it ambiguous. Some studies do find visitors tax-sensitive. Yet the UK and Germany, with Europe's third and fourth highest VAT on hotel accommodation, have Europe's fourth and fifth biggest tourism incomes.

Hundreds of thousands of Brits each year pay various tourism taxes on holiday. I have paid out hefty sums at airports for the privilege of entering Turkey and leaving Bermuda. I can't say it has influenced my choice of destination.

Besides, Scotland's hotels are increasingly owned by national or international chains, which could fairly easily absorb a Holyrood bed tax. Were the revenues ploughed back to grow bed-night demand in struggling locations they even might find it worth the pain. There could, though, be a risk that smaller indigenous operations, some of which are worth preserving, would be put at further competitive disadvantage.

It is an inconclusive argument and the authors resist definitive conclusions. Fears that duplicitous government might hijack revenues, or hoteliers use the tax as an excuse to invest even less in the quality of their products, need more than trite answers. But in its current fix, the industry cannot afford to rule any serious idea off the agenda. Eccentric as the timing of this idea may seem, its substance is serious.


 

In the News