Scotland's capital is in danger of hitting an affordability ‘tipping point’, business leaders have warned as the country’s first tourist tax kicks in.

Labour-led City of Edinburgh Council is imposing a five per cent ‘visitor levy’ from Friday.

The accommodation surcharge is added to the pre-VAT cost of the first five nights in hotels, self-catering, Airbnb, bed and breakfast, hostels and caravans.

The council says the levy should raise £50million a year for public realm improvements, street cleaning and policing.

But the Scottish Tourism Alliance (STA) said it ‘risks more harm than good’ and could see tourists taking shorter stays and spending less in local businesses.

STA chief executive Marc Crothall said: ‘A visitor levy has always threatened Scotland’s price competitiveness and risks creating a tipping point that many visitors will be unwilling to pay, further impacting the declining market.

‘Scotland is already one of the most expensive destinations to visit, and with VAT charged on the levy, this effectively becomes a double tax, further inflating costs for consumers.’

Scottish Ballet has cut short its December run of Cinders in Edinburgh because of the tax. The Edinburgh TV festival is also moving to Manchester next year after half a century in the capital because of the accommodation costs faced by its 2,000 delegates.

Scottish Conservative local government spokesman Alexander Burnett said: ‘Today marks the start of the SNP’s great tourist tax experiment – and it is Scotland’s hospitality businesses who are being forced to take the risk.

‘They have repeatedly warned this will bring more confusion, more costs and more red tape at the worst possible time.’

A room for two for the first three nights of the Fringe at Edinburgh’s Sheraton Grand currently costs £1596 on booking.com – and includes £60 in tourist tax. A city centre Premier Inn stay costing £956 means a tax of just under £40.

Glasgow plans to impose a five per cent charge from January and Aberdeen a seven per cent levy in April.

Edinburgh Reform MSP Angela Ross said: ‘Labour’s holiday tax is making the UK’s most visited city the first to punish tourists simply for staying overnight.’

Garry Clark of the Federation of Small Businesses said: ‘Collecting the levy, explaining it to guests, training staff and becoming familiar with the new systems all add to the workload during an already exceptionally demanding period.’

Council leader Jane Meagher said: ‘Cities and destinations across the world have managed similar schemes for many years. The 5 per cent rate is modest.’