Chamber and committees

I remind members of my entry in the register of members’ interests, in that I am a director and sole shareholder in a company that holds retail interests. I know what it is like to have to implement changes and new charges in a small business. Sometimes it is easy, but sometimes it is not so easy.

I wish to make two fundamental points in speaking to amendments 38 and 39. First, we need to consider the practical realities for very small businesses in implementing new charges. There is also an important point about the interaction between the proposed levy and VAT, including the sometimes complex nature of having to comply with VAT rules and, for many small businesses, having to pay VAT. The levy potentially adds to that complexity.

On the first point, as somebody with a retail background, I recall changes in the VAT regime and the introduction of the bag charge. Neither of those things was unwelcome—indeed, the VAT changes were very welcome at the time—but they were not always easy to implement. I remember spending one night until midnight in my shops, trying to get my tills working properly for the next morning, and that was not straightforward; it was also stressful. We should bear that in mind when we are asking for changes to be made not just for businesses but often for activities that sit alongside main businesses. The proposals might well represent a very significant additional administrative burden.

There are many forms of very small accommodation throughout Scotland that are important for our mix and our offer as a country. They often consist of just one or two bedrooms, and they are very much not the main economic activity—they might be on a farm, for instance. Those businesses are essentially run from a school exercise jotter and a cash tin. The assumption that is being made in this case, which is often made when Government makes such proposals, is that the change is as simple as adding a button to the till or adding a parameter to a computer system. Sometimes that is the case, but not for the smallest businesses. My amendments therefore seek to create a category, defined either by number of rooms provided or by a turnover threshold, that would exempt such businesses. My amendments would exempt from the scheme the very smallest businesses, which would find it difficult to administer the levy.

Secondly, as far as we are aware, the levy will be liable to VAT, and we need to be mindful of the interaction with it. Most other countries in Europe do not have VAT levied on accommodation. Pam Gosal’s amendments, both in their purposes and in highlighting that interaction with VAT, are therefore very important. I do not think that members should be under any illusion: VAT is not necessarily a straightforward tax, either to administer on behalf of Government or to administer on behalf of businesses. It is often a struggle for people to ensure that they can pay their VAT bill. It requires a degree of cash-flow management, which is a burden that we are placing on businesses. The levy will not just add a charge; there will be 20 per cent on top of it, too. In imposing the levy, we are adding complexity, and we need to consider the smallest businesses.

On Pam Gosal’s amendment 16, although we need to be mindful of the time and cost that might be required of businesses, I note that, with other taxes and levies, we do not give money back to businesses. When I was in business, I might have liked it if HM Revenue & Customs had given me a rebate for the time that it took me to prepare my tax returns—unfortunately, it did not. I wonder what precedent that would set. However, the point about giving consideration to time and cost to businesses is important.

My amendments are probing amendments. I recognise that they might not—

I was merely pointing out that, when it came to preparing my corporation tax and VAT, I was unable to claw back money for that. I really appreciate the point that we need to be mindful about the time and cost that will be required by businesses to prepare for the levy, but we need to ensure that we do so in a consistent manner.

As I was saying, although I recognise that my amendments, as drafted, might not be practical, the principle is about ensuring that we recognise the smallest microbusinesses, give consideration to them and, where appropriate, seek to exempt them.

There is a lot of merit in the proposal to exempt people who are doing useful things, both economically and socially, and people who are vulnerable or who are having to use accommodation through no fault of their own. However, my concern is about how the exemption would work and be policed, enforced and verified. Would we ask people to prove their reason for staying? What would stop people saying, “Just tick the box when you register because no one’s going to ask”? My concern is that the exemption would be exploited by people who do not have good intentions. I absolutely recognise that the amendment has good intentions, but I worry about people who do not.

Will the minister give way?

I am not the minister, Ms Gosal—unfortunately.

I will speak in support of the points that Neil Bibby has just made.

There are two fundamental points in this area. The first is that our tourism offer comprises a broad range of business types. Not the least of those are our cultural organisations, which form a critical part of that offer and so must be taken into consideration in assessing how the levy is rolled out and how the funding is used.

I turn to the second and perhaps more fundamental point. We will discuss definitions in the context of later amendments, but I point out here that having an effective consultation process will be vital if we are to give businesses in the sector confidence that the levy will improve the tourism offer rather than simply being another tax that they will have to pay.

Let us take this point head on: frankly, there are fears that this will be just another consultation exercise, that there will be another form to fill in and that it is something that local authorities will perform only in order to levy the tax. Businesses want to be involved in deciding how the money is to be spent.

I would therefore be grateful if, in his concluding remarks, the minister could give his thoughts on how the guidance can be devised and the requirements put in place so there is not only a form on a website, but engagement and co-decision-making with the businesses that are impacted. There must also be consultation about how the money will be spent so that it genuinely adds to the tourism offer in our towns, cities and rural locations, rather than simply being another fiscal burden on businesses that are already struggling—as Pam Gosal pointed out.

I should explain the primary purpose of amendment 28, in my name, because it might not be entirely clear.

Amendment 28 caps the number of nights to which the visitor levy would apply. As a member who represents an Edinburgh constituency, the key point for me is that, during the festivals in the summer, a large number of people use accommodation such as hotels but come here to work, provide their services and be part of the festivals. It strikes me that when people use accommodation beyond a certain number of nights, it ceases to be temporary and they cease to be visitors because they are here to work.

A threshold for the number of nights would be a simple way of providing an exemption for people who visit a place semi-permanently to work. It avoids the complexity of trying to come up with definitions and it is just a simple number. Amendment 28 is a probing amendment to explore how we would treat people who are here either for particular purposes or to service the tourism and visitor economy.

I will address the points that Miles Briggs raised. It is fair to say that, among local authorities and the business community, there are mixed views regarding whether a percentage rate or flat fee should apply. I have spoken to business organisations that have said that they have members who argue both sides. However, the arguments that Miles Briggs made have some merit.

There would be a considerable degree of additional simplicity to having a flat fee. When you apply a flat fee, it is simply a matter of multiplying it by the number of rooms that have been occupied over a given period. The complexity of having a percentage is not to be underestimated, not just for the reasons that Mr Briggs set out around additional charges, but also because the vast majority of accommodation providers will have variable rates, which means that some quite complicated record keeping and administration would be required. That needs to be thought through.

The other point is that there should be a degree of consistency, so that the system is understandable. The last thing that we want is 32 varieties of visitor levy, which would make the situation complicated and confusing for visitors who go to a number of places during their time in Scotland. It is important that there is local discretion around the levy—it should be a levy that is locally devised and implemented—but we should also look at ways to ensure that there is a degree of consistency in order to improve the ease of understanding of the system.

On the flipside of that—because there are opposing views on the matter—I note that the moment that you have a flat fee, you get into the complexity of how that is increased and administered, and all the issues that arise when there are fixed rates in law, such as fiscal drag and so on, which we are all aware of. Having spoken to colleagues in local authorities, I know that they are concerned that, if there were to be a flat rate, they would get into a continual debate—annually, or whenever the issue is reviewed—about what the fee should be. That is the argument for using a percentage rate.

Using percentages is inherently more complicated than other approaches—VAT is a non-trivial tax to collect, administer and police in order to verify that people are paying the correct amount. We should be careful about the complexity that using a percentage fee causes in the system that we are creating.

Finally, we need to think about how we treat people who are here to—

Of course.

I want to highlight two brief points. First, I recognise the issue of motorhomes, but a basic principle is that it is not always possible to tell who is staying where, regardless of the type of accommodation. We have to assume that people will be honest. I do not consider a motorhome per se to be different from any other type of accommodation.

Secondly, in not making liable for the levy vessels that are moored that provide accommodation, or vehicles that are parked up that provide accommodation, there is a risk that certain types of accommodation will not have the levy applied to them, whereas others will.

Does the minister acknowledge that that potential loophole needs to be thought about at stage 2 and, ultimately, stage 3, to ensure that there are no significant areas in which people can provide accommodation without being liable for the levy?

I note the minister’s comments about previous amendments. In relation to amendment 42, however, will the Government consider explicitly requiring local authorities, as they develop and deploy their plans for local levies, to consider small businesses and VAT thresholds? Such consideration could be required as part of the impact assessments under the bill.