Tourist Tax: Price Signal or Place Signal?

Let's talk about tax like a place thinker

Say "tourist tax" and the script writes itself: hoteliers warn about lost competitiveness, politicians promise reinvestment, residents wonder what they'll actually see in return…

The interesting question is whether a city can turn that tension into a real contract between visitors, businesses and residents.

The ritual of resistance

From Torino, where an increase in tourism taxes was launched in the beginning of 2026, to Edinburgh, where the first tourism tax in Scotland is about to be introduced in July, 2026,
the pattern is familiar.

Torino lifts its overnight tax: B&Bs jump from 2.30 to 3.80 euro per person per night, hotels step up in bands to 4.40 euro, while 5star properties stay capped at 5 euro. The sector responds with fears of being priced out against nearby municipalities and of losing already fragile margins.

Edinburgh designs a 5% visitor levy on the pre-VAT room rate, capped at five nights, projected to raise up to £50–60 million a year. Even before launch, industry bodies warn it could deter domestic visitors and dent the city's competitiveness in a cost-of-living squeeze.VAT room rate, capped at five nights, projected to raise up to £50–60 million a year. Even before launch, industry bodies warn it could deter domestic visitors and dent the city's competitiveness in a cost-of-living squeeze.

This ex ante resistance is present everywhere and is based on a logic economic principle: a price increase will result in a decrease in demand.

What the evidence actually says about competitiveness

A study for the European Parliament examined the impact of tourism tax on the competitiveness gives an answer.

Taxes are only one factor in competitiveness among many—product quality, marketing, connectivity, safety, exchange rates, labour costs, and wider macro-conditions all matter at least as much and often more.

Taxes can affect competitiveness at the margin, especially in very price-sensitive segments and destinations. There's indeed a shift in preference between beach holidays when prices go up, as we have seen in Turkey, Greece, and Spain in the past. There's less evidence found in cities: an introduction or increase in tourism taxes has not really led to a decrease in visitors in European Cities. In Amsterdam, for example, the tax is the highest in Europe: 12.5% of the overnight price, on average 18 euros per night. It was introduced in 2024, and it hasn't reduced the number of visitors yet. It will be interesting to see if an additional VAT increase from 9 to 21% will have an effect.

Well-targeted taxes, kept at relatively low levels and used to fund infrastructure and tourism services, can even support the sector's long-term attractiveness by improving the very assets visitors come for targeted taxes, kept at relatively low levels and used to fund infrastructure and tourism services, term attractiveness

Reinvestment as a contract

It's better for the tourism industry to protect the long-term competitiveness of their business, and that means pushing to ensure every tourist tax is reinvested in making the place more competitive over time: investments in accessibility, the attractiveness of the city, public space, culture, and services. When a city introduces or increases a levy, every business owner and every resident should ask what it will be used for—and keep asking until the link between what is paid and what is improved becomes visible.

Torino is moving in the right direction, willing to link its increase to supporting accommodation businesses, boosting promotion, and improving tourism services so that the city stays attractive against its neighbours. We recommend Torino to be more specific like Edinburgh is.

Edinburgh has gone through a process of collecting many ideas and initiatives of what the tourism tax could be used for. In the month of February, councillors are going to decide which projects can use the future visitor levy income. They anticipate a fund of about £41 million for city improvements.

For now, it looks like the tax will support specific projects (next to funding key city needs like social housing and 2% reinvestment in the accommodation sector):

  • The George Street and First New Town public realm project.

  • A new masterplan for Portobello Promenade.

  • Better basic services like new street bins, faster cobbled-street repairs, and more accessible public toilets.

They demonstrate how tourism can support the transformation of the city, which increases the attractiveness for future investors, business, and tourism. At the same time, the tax can pay for basic services for visitors and residents.

At this point, tax stops being just a price signal and becomes a governance tool. It says: visitors contribute a little more; in return, the city commits to show clearly what that extra buys.

Talking tax as place strategy

Thinking like a place strategist also means resisting two easy stories:

  • "Tax will kill demand" – when evidence shows that modest levies rarely outweigh destination appeal, connectivity, and overall trip cost.

  • "Tax will magically fix everything" – when, without transparency and codesign, it risks becoming just another unpopular charge.

The more honest narrative is about reciprocity. Tourism isn't free: it uses space, services, and attention. A carefully designed levy is one of the few tools cities have to align visitor value with visitor impact, especially when revenues are clearly reinvested in public realm, culture, mobility, housing and climate resilience.

So yes, let's talk about tax like place thinkers do—not only as a line on the bill, but as a visible test of whether a city is serious about reinvesting in the place that visitors come to enjoy and residents call home. 

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