Their warning came in response to a proposal from Edinburgh City Council leader Keith Geddes that a tourism tax should form part of a review of local government finance.

Councillor Geddes called yesterday for the next government to set up an independent commission to examine fresh ways of raising local government revenue and also easing the council taxpayers' burden.

"A visitor tax or hotel tax is a tax which is in place in a large number of places around the world ranging from between 2% and 15%. In terms of Edinburgh's specific position, the council pays £7m a year on tourist-related activities - that is £42 per head for the average council tax-payer on Band D.

"I accept that council tax payers should make some contribution to tourist -related activities because tourists bring in wealth and business, but why should they shoulder the whole burden? A small levy, say of £2 a head, would raise more than £12m and benefit the city," he said.

Edinburgh's Hogmanay celebrations had meant that every hotel bed in the city was filled. The cost of the event had been borne largely by public funds with a little private help, but had been of enormous benefit to hotels and guest houses, said Councillor Geddes.

If hotels paid a small levy, then the council would be able to ensure that museums, galleries and other attractions remained free, he said, at a time when it was generally recognised throughout the country that the current system of financing local government could not continue.

Councillor Geddes said it would be up to the independent commission to decide methods of collection, probably by examining how schemes worked elsewhere. However, he suggested that this might be a tax which local authorities could "buy into or not, as appropriate".

"If some authorities are not too keen, they would not have to pay," said Councillor Geddes.

Senior Scottish members of the British Hospitality Association warned that, if the tax was restricted to Edinburgh, it would reduce the city's competitiveness with other destinations such as Glasgow, and that even a small levy would make a difference to visitors' willingness to visit a particular destination.

Mr. Peter Taylor, chairman of the BHA, also warned that, if introduced to Scotland, the levy would be seen as yet another tax and would destroy the level playing field that currently operates.

"Obviously, the tax would have to be passed on to the customer and this makes us less competitive and would create a spiral effect," he said.

The chief executive of the Scottish Tourist Board, Tom Buncle, said: "Although there are city centre hotels in Edinburgh which now enjoy all-year occupancy, that is a fairly recent development, and we are not so assured that all-year tourism is here to stay that we can afford to introduce punitive measures that might jeopardise this progress.

''It is important that we permit the industry to thrive and derive economic benefits that follow from that, rather than penalising that success."

The STB seems anxious to resist any moves which smack of looking to a successful industry to sponsor a funding crisis rather than carrying out a radical reform of local government finance.

It also points to the level of VAT imposed on accommodation, restaurants and other visitor attractions - 17.5% in the UK, making it the second highest in Europe.

Dr. Gordon Adams, STB Director of Planning and Development, said that tourists and tourism businesses already "paid their way" through a variety of local and national taxes, and that proposals to increase the Air Passenger Duty introduced in the last Budget also represented a direct tax on domestic and international visitors.

Glasgow's Lord Provost Pat Lally, who is also chairman of the Greater Glasgow and Kelvin Valley Tourist Board, said: "A proposal to put a tax on hotel beds is something which is done in other places. Personally, I would be surprised if the STB had not already considered this matter in someway or other, but it is something which would have to be brought in nationally by the STB and national government and not something for local tourist boards to bring in separately."

The future direction of the Scottish tourism industry and its funding will be addressed when The Herald and the British Hospitality Association in Scotland host a major conference in Edinburgh on March 13.  Scotland's Hospitality Industry Congress, at the Edinburgh International Conference Centre, will build on the successful 1995 SHIC and The Herald's acclaimed tourism conference last May.

SHIC '97 combines both events in one.

Workshop sessions will cover the challenges in providing a quality workforce, business plans, how best to work with area tourist boards and local enterprise companies, information technology, and the pursuit of excellence.

A business connections arena will allow delegates to talk to banking, accountancy, marketing, and energy conservation professionals.

Conference speakers will be Tom Romano, chairman of the American Society of Travel Agents; Rod MacKenzie, regional director, North America, of the New Zealand Trade and Development Board; and Fraser Morrison, chairman of Highlands and Islands Enterprise.

Delegate fees are £69 plus VAT for the conference, plus an optional £35 plus VAT for the gala dinner. Contact Mr. Iain Morton on 0141 553 1930 for further information or to register.