Scotland tourism: What we can learn from the Texas Tourist Tax

A lot of the talking points sound very familiar to anyone paying attention to world tourism. Because they have already been well rehearsed. And not least in the Lone Star State.

Here in Scotland a lot of the debate about the new tax has focused on concerns from the politically embattled short-term-let sector. 

At the end of last month Airbnb, the biggest online platform for holiday accommodation, warned the proposed Scottish tax, combined with a new licensing regime, would impact the industry’s “vitality”. 

Some industry leaders ratcheted the rhetoric even higher, saying that tourism taxes - ubiquitous in developed world holiday hotspots - would give Scotland a “negative and unwelcoming” image.

Short-term let (STL) providers are at the centre of controversies in Texas too. In America, however, the focus is on how authorities are trying to collect what they called a hotel occupancy tax or HOT from short-term lets.

In Texas state, county and city and town authorities all charge HOT and theses levies add up to a fair whack of bills.

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Which brings us to Houston, America’s fourth biggest city, and one of the places where an overnight stay is most heavily taxed. 

The city’s non-profit destination marketing vehicle, HoustonFirst, levies 17% on  bills. 

The city gets 7% of that, the state another 6% and 4% goes to the local Harris County, which has a population just a little smaller than Scotland’s.

Starting back in 2019, Airbnb started automatically collecting the tax on online bookings for short-term lets too.

This has been a long road. Houston, like a number of other US cities, has had high lodging taxes for a long time, since before the boom in internet booking platforms. And collecting these levies has not always been easy. 

It was back in 2007 when it first sued hotel booking websites to add its HOT to their prices. 

Elsewhere in Texas collecting tax from short-term rental properties is still proving tricky. Take Tomball, just outside Houston and still in Harris County. 

This small town also has a local 7% HOT for nearly two decades. And it wants to make sure it gets its share from rents through Airbnb and other online platforms - without introducing some of the licensing regimes, including near bans, on STLs elsewhere in the US.

“At this time, we’re not seeking to require any regulatory compliance or licensing for short-term rentals,” Finance Director Katherine Tapscott told the local city council back in June. “We’re just wanting to collect that hotel occupancy tax.”

Even in a small town, this could be a decent revenue stream. The city has identified 93 STL properties. It reckons they alone should be generating a quarter of a million dollars a year. But a firm hired by the city to collect taxes is now trawling though online booking websites to find more.

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So who do Texan communities use these taxes for? Well, a lot goes to destination marketing. Houston also spends about a fifth of what it raises out of its city share HOT to fund the arts. In 2014, for example, that was $17m.

But HoustonFirst this year also won permission from Texas’s Republican governor, Greg Abbott, to keep revenue above and beyond what it raised in 2013 to upgrade the city’s convention centre and downtown. 

Over the next three decades this extra tax boost could bring in $1.8 billion. 

“We want to build the kind of convention district that really allows us to do a lot more than even what we’re able to do today,” the boss of HoustonFirst told the Houston Business Journal. “This is an economic development in our city that we will benefit from for decades.”

In other words, tourism taxes go to boost tourism, and the rest of the economy. Or that is the theory. Even America's conservative right, with its dislike of tax and regulations, favours the kind of regime sparking outrage in supposedly left-of-centre Scotland.

Remember, it is very hard to compare tax systems. Tourism providers in Scotland will stress we have a totally different set-up, with VAT and other taxes that may not exist in America.

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But the desire to make sure STLs are taxed does appear to be the same on both sides of the Atlantic. And this does not always please property owners.

In El Paso, at the other end of Texas from Houston, owners of holiday homes marketed through websites like Airbnb and Vrbro revolted over plans by local authorities to make them pay the same levies as hotels.  

Most providers are already paying state taxes. But, it emerged earlier this year, the city was not monitoring the market to take its share. Hotels in El Paso are taxed at 17.5%.

All across Texas there are complaints about the abuse of STLs, including anti-social and criminal behaviour by guests. It was this which sparked demands for more regulation and taxation in El Paso. This did not go down well with the sector.

A local councillor, Alexsandra Annello, hosted a meeting on STLs back in February. “I think there is a need for something,” she told the El Paso Times, a sister paper of The Herald. “It’s a business. How many businesses are unregulated?” 

"And I was hoping from the Airbnb people that they could have more of a conversation" about what they see as reasonable ways to track their business, instead of just saying they don't want anything.”

In rhetoric very similar to that of Scottish operators, STL operators predicted doom if they were to face regulation and full hotel-level taxation. 

One owner, Edward Beck, said he would lose hundreds of thousands of dollars. “The proposed regulation they could put out would hinder El Paso from entering into the gig economy….based on what they do with Airbnb,” he told local TV news. "Because everything gets passed down to the consumer, Airbnbs in El Paso will become more expensive.”

STL owners say hotels make extra money from their facilities and can take the higher tax rates. And they say the number of listings on Airbnb has fallen in commodities - such as New York - where regulation and taxation far tougher than Scotland’s gave been introduced. 

Last month El Paso decided not to impose its local hotel tax on STLs - with local airbnb owners describing this as a “good surprise”. Instead officials will run a pilot project collecting and analysing complaints about rented properties. 

Stories about tourism tax and STL regulation from Texas closely resonate with those in Scotland. Indeed, local newspapers across north America carry almost exactly the same controversies. 

Just to illustrate this point, it is not just Houston in Texas where hotel taxes for Airbnbs are in the news. It is also the case in Houston County, Alabama. There, the local county commission is considering proposals to tax hotels and STLs to upgrade its parks and recreation facilities.  

Commission chairman Brandon Shoupe last month announced the idea. “The good thing is the people in Houston County don’t have to pay that,” he said. “The people that visit Houston County, stay in our hotels or stay in our Airbnbs, they would, but the people that live here predominately would not.”