EKOS report on the Visitor Levy for Argyll and Bute Council

Case study: Visit Mull and Iona Destination Management Organisation

About the organisation

Visit Mull and Iona is a volunteer-led Destination Management Organisation (DMO). Established in 2018 the DMO aims to promote Mull, Iona, and the surrounding islands through targeted marketing campaigns, highlighting the key strengths of the islands in order to benefit the whole visitor economy. Visit Mull and Iona has 153 members representing 290 Mull and Iona businesses across all hospitality sectors. Membership is open to anyone with a tourism related business on the islands to allow them access to a range of promotional benefits.

Input to the consultation process

Visit Mull and Iona DMO discussed the proposed visitor levy scheme at its annual general meeting, and also encouraged its members to submit their views to the DMO to help inform the organisation’s formal response to the council’s consultation. The DMO used the feedback received from its members to identify common issues and concerns and submitted two letters to the council (dated December 2024 and April 2025). The DMO also encouraged its members to respond to the consultation directly, for example, through the surveys, attendance at drop-in events, etc.

This case study draws on an interview with the Acting Chair of Visit Mull and Iona DMO and the two letters submitted by the organisation to the council, including some of the quotes below.

The visitor levy legislation in its present form is an unacceptable model for island communities

Visit Mull and Iona DMO and its members understand the opportunity that a visitor levy scheme could have for Argyll and Bute but the chair caveated this by saying:

“If we could find something that was fair and workable and where we were properly consulted to make it work, especially for the islands. They would go for it. Because we want that income, we want that infrastructure, we need that infrastructure. But this is just the wrong model on every front. You could easily charge visitors as they come into the island and charge them a fair rate so that they’re not put off from visiting.”

Visit Mull and Iona DMO emphasised that its members do not support the proposed visitor levy scheme in its current form – both the national legislation and the council’s proposals are not considered an appropriate model for island communities such as Mull and Iona. There is overwhelming concern amongst its membership that the proposed visitor levy scheme would be damaging for the visitor economy and for island life more generally.

“This levy unfairly disadvantages islanders, both as residents and business owners, operating in such a remote location. Having to stay overnight somewhere is a common occurrence, whether attending medical appointments, school events for our children, mitigation for cancelled ferries or even accessing everyday services such as food shopping. These are not ‘visitor’ or ‘tourism’ activities, yet it would seem that they will be classed and ‘taxed’ as such and make island living even more tenuous financially.”

Members concerns include that the one-size-fits-all model outlined in the legislation is not suitable for all of Scotland. They recognise that it may be suitable for cities such as Edinburgh and Glasgow, but that it may not make good economic sense in rural areas, especially where tourism is declining, such as across Argyll and Bute.

“The council should have rejected the conditions of the visitor levy as flawed, and not progressed to consultation. In particular the legislation is not suitable for islands, which account for 17.5% of the population of Argyll and Bute.”

“At a national and local level, there was no feasibility or impact study about islands. It’s just as if we don’t exist and yet tourism is an absolute major part of our economy.”

Members are especially concerned about specific aspects of the legislation as described further below.

The terminology – ‘visitor levy’: this is considered misleading as the levy includes residents’ overnight visits which are not recreational or business. These types of stays are much more likely for island communities and therefore the levy is a tax on island life. The visitor levy is an accommodation tax on everyone who has a paid overnight visit for whatever reason. Services for the islands such as trades and healthcare which require to stay overnight will also be charged the levy, increasing costs to communities and businesses for services.

Exclusions exacerbate existing problems: day visitors, motor homes and cruise ships are not included in the levy which would exacerbate serious existing problem caused by these sectors in the environment and transport infrastructure of Mull and Iona. Mull is popular with day visitors travelling by car which puts a strain on the travel infrastructure. The visitor levy will encourage more day visitors which will further erode the island infrastructure with no monetary benefit. Motor homes will be encouraged to overnight outside campsites to avoid paying the levy. Cruise ships will swamp island communities with no means of control.

Accommodation providers must gather the visitor levy: members consider it unfair that accommodation businesses would have the extra work of administering the visitor levy on top of all the other challenges they face.

This would put an unacceptable, unfair, bureaucratic burden on accommodation providers, while other types of hospitality businesses are unaffected. Mull and Iona can only be entered by sea (or for a tiny amount of visitors, by air). A visitor levy applied at the point of entry would be the sensible option for Mull and Iona. It would remove the burden from accommodation providers and would allow the inclusion of income from substantial visitor segments such as day visitors, motor homes and cruise ships. The visitor levy is considered almost the last straw – the DMO is certain that some of its members will decide to close their business, adding to the economic downturn of the visitor economy – at a time when support is needed to encourage more people to consider starting small bed and breakfast businesses and to ensure diversity of accommodation provision on the islands.

“With the current struggles with the lack of reliable ferry provision, the state of the economy, the recent cost of registering for the Short Term Let Licence and the overall extra cost to visitors in getting to the island, introducing a levy of any sort is without doubt going to put the islands at an increased disadvantage when it comes to tourism. We feel that this levy, certainly in its proposed state is unfair and unnecessarily burdensome to accommodation providers.”

The levy must be a percentage rate: this is much more complicated to account for than a fixed rate, making extra work for accommodation providers.

The levy is subject to VAT: living and running a business on an island has more challenges and is more expensive compared to the mainland. The majority of accommodation businesses on the islands are small and often operate just below the VAT threshold. Despite the levy not being income, it is to be added to turnover figures for reporting to HMRC, forcing some businesses to become VAT registered, with the associated added increase in price and administrative burden. This may put some businesses over the VAT limit who may then decide to reduce their offer to stay under the VAT threshold, or even close. Some accommodation providers may be forced to reduce their prices to be able to fund the levy, whilst staying below the VAT threshold and remaining competitive with the rest of Scotland. This would have unacceptable repercussions on island businesses and the fragile economy of Mull and Iona.

Visit Mull and Iona DMO and its members are disappointed that the council has not asked the Scottish Government for a review of the legislation to ensure it is fit-for purpose for an area like Argyll and Bute with so many islands, and also with the council’s current position on no local exemptions. Members hold a view that businesses that fall below the VAT threshold should be excluded and that island residents (including pregnant women) should also be excluded.

“We believe the council is not taking enough time to properly consider all the many, unworkable negative implications of the legislation.”

“Due to the time requirements of travelling off an island, Mull and Iona residents will suffer increased cost of living by having to pay the levy when they book an essential overnight stay in Mull, Oban or other areas, for health visits, to visit their children at Oban High School, go to funerals and many other reasons for travel that can normally be achieved in one day for those who don’t live on an island. The increase in cancelled ferries due to the failing ferry infrastructure has increased the need for unplanned overnight stays in Oban and on Mull for residents which would become even more expensive. A visitor levy should not apply to island residents.”

The visitor economies of Mull and Iona are in decline and a visitor levy is not considered appropriate

Visit Mull and Iona DMO and its members do not think the economies of Mull and Iona are appropriate for a visitor levy scheme in its current form.

“Many of our members feel that Mull and Iona should be excluded, because of the state of the economy, and the fact that levy income is not guaranteed to be spent where it was earned.”

Mull and Iona depend very highly on visitors for their economy, which has suffered a series of setbacks in recent years. Since Covid, some businesses which closed have not re-opened and income lost in the tourism sector is still being felt. The Islands are still recovering from a lack of the return of overseas visitors; meanwhile the domestic market is weak due to the cost of living crisis.

Key concerns raised by the DMO include that there are no formal tourism statistics for Mull and Iona. Rather, visitor statistics are included within figures for Argyll and Bute which are not representative of Mull and Iona, which are much more dependent on visitors for their economy. They say that it is therefore not possible to judge the impact of the visitor levy scheme on Mull and Iona without an economic impact study. The current impact study which the council say they undertook is not applicable to Mull and Iona.

“Comhairle nan Eilean Siar commissioned Urban Foresight to investigate the feasibility of an overnight accommodation visitor levy, including cost-benefit scenarios. A&BC cannot make a decision that a visitor levy is appropriate for the islands without a similar feasibility study.”

Further, there is a reported downturn in accommodation bookings. Many accommodation provider members have reported a downturn on income for the past two seasons, as much as 15%, partly due to the ferry disruption. In addition, eight bed and breakfast members closed due to the introduction of the short term let licence scheme.

Any further downsizing or closure of accommodation businesses due to the visitor levy scheme would have a multiplier negative effect through all hospitality sectors as well as all the business sectors that rely on them. Councils that have opted out from the visitor levy will have a bigger appeal to visitors than those that opt in, promoting their area as visitor-welcoming and affordable, and positioning Argyll and Bute businesses at a competitive disadvantage.

In addition, the DMO and its members feel that a visitor levy is not appropriate for Mull and Iona given the standard of the ferry infrastructure (that is, it does not provide a reliable service to visitors). The DMO point to the ‘disastrous failure of our ferry fleet since 2019 is continuing throughout 2025 and has caused immense problems for the visitor economy as well as residents lives’. The high level of ferry breakdowns coupled with a reduced service for the 2025 season has already caused many accommodation cancellations. The negative ferry media coverage and unreliability continues to put off even the most loyal visitors to the islands. A lack of confidence in the ferry service continues to affect visitor numbers and the Mull and Iona economy.

“Sometimes we don’t know from day-to-day what the ferry timetable is going to be.“

They suggest that a visitor levy would make a visit to the islands more unattractive.

“The council say the ferries will be running by 2027 when the levy is introduced. But how can they predict that visitor confidence will return, that new ferries which are delayed will arrive and the current fleet, which is disintegrating at a frightening pace, will last.”

How revenue generated by a visitor levy should be spent

As noted, Mull and Iona have a high level of visitors, with the associated negative impacts on infrastructure that this brings. The DMO and its members support levy income from Mull and Iona being fully invested back into the local area, not spread throughout Argyll as proposed. A levy income which is not ring-fenced to offset the impacts of tourism would make the islands less attractive to visitors.

The proposed visitor levy scheme objectives sound good in theory and would help to support the visitor economy but are considered very broad – ‘we need much more detail about how and where the revenue would be reinvested locally.’

Things that could make a big difference on Mull and Iona are said to be:

• road infrastructure improvements.
• pier infrastructure improvements (for example, Craignure Pier on the Isle of Mull).
• general island infrastructure that makes it hard for visitors to come and get everything they need (for example, more visitor attractions).
• accommodation for tourism and hospitality sector staff which is considered particularly lacking.

Fundamentally, the islands need a reliable ferry service and good pier infrastructure.

Final thoughts from Visit Mull and Iona DMO

The proposed Argyll and Bute visitor levy scheme in its current form would damage the vital Mull and Iona accommodation sector, the daily lives of all islanders and the visitor economy of the islands. The Scottish Government visitor levy legislation is highly flawed, and the council has rushed into the potential to deliver a levy without enough consideration. If the council wish to introduce a visitor levy scheme, the whole consultation process must start again, with lessons learned on the many negative consequences of the current visitor levy model and the defective consultation process. A visitor levy applied at the point of entry would be the more sensible option for Mull and Iona.