A 12-week consultation period will begin this fall, during which residents will be asked whether the five percent levy mentioned in the original proposal should be increased or decreased.

According to the Edinburgh Evening News, input from residents and local businesses will shape the final plan, which is expected to be approved in January.

The Scottish Greens have proposed increasing the surcharge to eight percent, the BBC reports, with the charge set to be introduced in time for the 2026 festival season.

Councillor Cammy Day said £5 million of the funds raised would go towards housing, and 35 per cent to the arts sector.

The SNP faction on the council pushed for an increase in housing benefit to £20m, but the motion was defeated, reports say.

Paul Laurence, the new chief executive of Edinburgh City Council, said removing £5m from the potential £50m annual increase would “close” the “viability gap” on council land earmarked for housing, and that an additional £70m could be generated for housing development through borrowing.

But Leon Thompson, director of UK Hospitality Scotland, said visitors were already facing high prices, stressing: “Tourist taxes are not good for this country.”

“We’re already not a very competitive destination,” he told BBC News. “We have the highest VAT rate for hospitality in Europe and we also have outdated business rates which all add to the cost for businesses and those costs are obviously passed on to the visitor experience.”

Mr Day told BBC Radio’s Good Morning Scotland that the levy is equivalent to “a couple of pounds off a cup of coffee. The evidence that we’ve done and research from around the world shows that a levy has no impact on tourism.

“I can’t imagine a few pounds putting anyone off visiting the city,” he added. “If you can afford to spend hundreds of pounds on a hotel room, you can spend a few pounds to support the city you’re visiting.”

He also said the move would “significantly increase our ability to invest in the visitor experience and the tourism pressures we face, such as keeping the city clean and addressing the housing shortage, so that everyone can continue to enjoy everything the city has to offer.”

In November 2023, the city council declared a state of emergency due to rising house prices and rents, and record numbers of homeless people.