Tourist tax

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A tourist tax is any form of tax aimed at generating revenue from tourists or the tourism industry.

Contents

Tourist taxes are generally a way for governments to generate revenue for the consolidated fund but can also be a hypothecated levy used to address the impacts of tourism. [1]

The tax can be used to mitigate the increased demand on infrastructure and public services, to address the environmental and sustainable impact of tourism and to ensure an the tax burden is split equitably. [1] [2]

Tourist taxes are also used as a tool to regulate the flow and behaviour of tourists, to provide funds for specific events or projects, used to promote and market the destination or used to diversify the economy of areas reliant on tourism. [1] [3]

The process for paying tourist taxes can either be in advance as part of the visa process or through an online portal, directly on arrival or upon hotel check-in, or included as part of a bill or airline ticket. [4]

Types

Hotel tax

The most common type of tourist tax in Europe and the United States is to levy a tax on accommodation known as a hotel tax, occupancy tax, lodging tax or bed tax. [5] The tax is levied against individuals when they rent accommodation (a room, rooms, entire home, or other living space) in a hotel, inn, tourist home or house, motel, or other type of lodging. [6]

In most countries the tax is levied by municipal, regional or national governments and is usually collected at the point of check-in or, in some cases, as part of the booking process. [6] Hotel tax is paid in addition to VAT and other taxes. [7]

The implementation of the tax varies from city to city. Reykjavík, for example, charges a flat rate per night, per room whereas Amsterdam charges a fixed percentage of the total accommodation cost. In Paris a fixed fee for the duration of the stay is charges which varies depending of the star rating of the accommodation. [8] Iceland and Romania charge a fixed taxed national-wide whereas in Spain and France hotel taxes vary by municipality.

As of 2024, the highest hotel tax in the U.S is in Houston, Texas which is levied at 17% and the highest rate in Europe is Amsterdam where a tax of 12.5% is due. [3] [8] [9]

Arrival tax

Arrival taxes are paid by incoming visitors to a country and are collected either on entry or pre-arrival as part of the visa application process. The tax can either be a fixed fee, for example, NZ$ 100 for the duration of a stay in New Zealand , or US$ 200 per day for visitors to Bhutan (thought to be highest form of tourist tax of any kind). [10] [11]

In contrast to hotel taxes, which are usually charged per room, arrival taxes are levied against the individual.

Some arrival taxes are not strictly tourist taxes as they can be applied to all types of passengers.

Arrival taxes can vary depending on the port of entry, mode of travel, reason for travel, travel class, nationality or age. [12]

Departure tax

Simular to arrival taxes, departure taxes are levied at the boarder against visitors to the country upon departure.

In 2019 Japan introduced a "Sayonara Tax" of ¥ 1,000 to visitors leaving the country and Indonesia charges a tourist departure tax, that differs depending on the airport. [3]

Departure taxes can have many variable meaning passengers on the same flight can be required to pay a different level of tax depending on the travel class, final destination, type of travel, nationality or age. [12]

Although departure taxes are usually charged to foreign tourist leaving their destination country, the Turkish Government have a departure tax only payable by Turkish citizens leaving the country for tourism or business. [13]

Not all departure taxes are strictly tourist taxes as they can be applied to passengers irrespective of type of travel.

Cruise tax

In some jurisdictions, cruise passengers are sometimes subject to different taxes than other types of visitors.

The Netherlands has a specific cruising tax is charged for people staying onboard cruise ships docked in the country. [3] Where as Greece has imposed a Cruise Ship Passenger Levy for cruise passengers visiting certain islands in peak periods. [14]

However, cruise ships receive preferable tax arrangements in other ways, such as onboard restaurant and catering services not being subject to VAT in most tax jurisdictions. [15]

Indirect and other forms of tourist tax

Tourists are subject to other taxes when visiting a country that non-tourists also have to pay. Tourists are expected to pay VAT on goods and services (although some country incentives tourist spending through Tax-free shopping) as well as other forms of non-tourist specific taxes such as the universal departure taxes as is the case with the Air Passenger Duty levied against all air passengers outbound from the UK, The Air Travel Tax in Ireland and the German air passenger taxes.

There are also other instances where tourists are expected to pay a higher tax rate than non-tourists. Tourist attractions can often be priced differently for citizens than for visitors as is the case in much of Asia. [3] Similarly, in Europe cultural sites can sometimes be cheaper or free for EU citizens and full priced for non-EU citizens. [16]

Some countries provide a reduction in tax for tourist related services which can some times be passed on to tourists including lower level of sales tax and VAT for accommodation services, passenger transportation, restaurant and catering services with admission tickets for sporting events and some cultural services being entirely exempt. [15] [17]

Some activities are specifically targeted by some governments for higher rates of tourist taxes as is the case in France where skiing lifts and access to off piste skiing carries a levy. [15] Similarly, in Korea an additional bath tax  [ ko ] is levied against users of hot springs.

Impact

Tourist taxes are primarily a way of increase revenue for governments as with all other taxes. However, tourist taxes can be used as an effective way of addressing the impact that tourism can have on the city or region and is increasingly being employed to manage the impacts of overtourism and the climate crisis in the areas in which tourist taxes are instituted. [18]

New Zealand's NZ$35 Visitor Conservation and Tourism Levy, Bhutan's Sustainable Development Fee, Greece's Resilience Fee for the Climate Crisis and Bali's tourist tax are all examples of tourist taxes that are ring-fenced for sustainability initiatives. [19] [20] Although not ring-fenced in all areas, the revenue of tourist tax is often still used for sustainable purposes. For example, Lake Como used €350,000 from its hotel tax income to fund the city’s organic waste collection and improve their lakeshore maintenance programme. [21] [3] The Balearic Islands in Spain have a separate Tax for Sustainable Tourism which differs from the rest of Spain's tasa turistica. The Tax for Sustainable Tourism is specifically hypothecated managed by a special government commission for water infrastructure, cultural restoration and environmental preservation. [15] They also took the decision in 2024 to use a portion of their tourist tax income to diversify their economy and reduce their dependency on tourism industry. [22]

In 2002 the Balearic Islands introduced an eco-tax on tourists in the form of a bed tax, levying everyone above the age of 16 with a €1-€2 per night tax. The tax was repealed after 2 years after tourist numbers dropped by 25%. [15]

Venice and Civita di Bagnoregio are both using entry fees in an attempt to limit tourist numbers by charging a €5 entry. In its first year, the fee has had little impact on visitor numbers and has been seen a failure by some. However, the fee made €1 million in the first 11 days which has been used to improve services for Venice residents. [3] [23] [24] [25]

Implementation

The tourism industry is susceptible to high Price elasticity meaning that small changes to tourist tax have a large impact on the demand for a particular destination when considered independently. [15] However, the pass-through rate of tourist taxes to tourist can greatly impact the efficacy of their intended purpose when used to encourage or deter certain consumer behaviours. [15] When tourist taxes have been reduced to incentive tourism the impact was minimal in Portugal, where vendors only passed through 25% of the intended saving, compared to Finland which saw a large boost to their tourism industry when 100% of the VAT savings were passed through to consumers. [26] It has also been shown that visitors to different types of destinations are more reactive to certain tax changes. Tourists to cities show more elasticity than tourists visiting beaches, for example. [15]

2019 graffiti in Barcelona, saying "tourist go home" followed by an anarchist A Tourist Go Home (49166615636).jpg
2019 graffiti in Barcelona, saying "tourist go home" followed by an anarchist A

Reactions to direct tourist taxes can sometimes be received negatively by tourist and the tourism industry both in the destination and in the countries from where tourists come. [15] The public perceptions of these taxes has been shown to have a direct impact on tourist numbers. When the Balearic Islands introduced a bed tax without consultation they experienced a 25% fall in tourists which has been partially attributed not to the tax directly but to the reaction of travel agents moving their business elsewhere. [15]

Various approaches can be used to target taxes more specifically such as not charging business travellers, only charging foreign nationals, varying the fee depending on the duration of the stay, differing the rates depending on mode of arrival or port of entry, or only charging a tax at peak periods. [3] [27]

In March 2023, in response to concerns over National Park funding cuts in the UK, [28] [29] ethical travel company Responsible Travel conducted a survey of 670 UK travellers to see if they would be willing to pay a levy to support nature conservation when visiting a National Park or Area of Outstanding Natural Beauty. Ninety percent of respondents confirmed they would be happy to pay between £2 and £10 per night if proceeds were ringfenced to support local conservation projects. [30] An approach adopted by the US National Parks. [31]

Tourist taxes can be perceived negatively by residents of tourist locations when they do not see the tourist taxes being reinvested in the affected communities. This was the reason behind some of the protests in Barcelona and Majorca as part of the wider Spanish anti-tourism protests. [32] [33] Protests also arise when there is a lack of tourist taxes in some cases, for example, in the Canary Islands. [34] A report by UN Tourism found that, when not implemented correctly, tourist taxes can have negative and unintended consequences. [2] [35]

UN Tourism has laid out seven principles that should be considered when designing tax policy for tourism tax. They recommend that tourist tax should be: [35]

Related Research Articles

<span class="mw-page-title-main">Tourism in Australia</span>

Tourism in Australia is an important part of the Australian economy, and comprises domestic and international visitors. Australia is the fortieth most visited country in the world according to the World Tourism Organization. In the financial year 2018/19, tourism was Australia's fourth-largest export and over the previous decade was growing faster than national GDP growth. At the time it represented 3.1% of Australia's GDP contributing A$60.8 billion to the national economy.

<span class="mw-page-title-main">Tourism in New Zealand</span>

Tourism in New Zealand comprised an important sector of the national economy – tourism directly contributed NZ$16.2 billion of the country's GDP in the year ended March 2019. As of 2016 tourism supported 188,000 full-time-equivalent jobs. The flow-on effects of tourism indirectly contributed a further 4.3% of GDP. Despite the country's geographical isolation, spending by international tourists accounted for 17.1% of New Zealand's export earnings. International and domestic tourism contributed, in total, NZ$34 billion to New Zealand's economy every year as of 2017.

<span class="mw-page-title-main">Duty-free shop</span> Type of retail outlet

A duty-free shop or store is a retail outlet whose goods are exempt from the payment of certain local or national taxes and duties, on the requirement that the goods will be sold to travelers who will take them out of the country, who will then pay duties and taxes in their destination country. Which products can be sold duty-free vary by jurisdiction, as well as how they can be sold, and the process of calculating the duty or refunding the duty component.

<span class="mw-page-title-main">United States passport</span> Passports issued to U.S. nationals

United States passports are passports issued to citizens and non-citizen nationals of the United States of America. They are issued exclusively by the U.S. Department of State. Besides passports, limited-use passport cards are issued subject to the same requirements. It is unlawful for US citizens and nationals to enter or exit the country without a valid US passport or passport-replacement document compliant with the Western Hemisphere Travel Initiative, though there are many exceptions; waivers are generally granted for U.S. citizens returning without a passport, and the exit requirement is not enforced. As of June 2024, a United States passport allows visa-free travel to 186 countries and territories, being ranked as the eighth most powerful in the world in terms of travel freedom per the Henley Passport Index.

<span class="mw-page-title-main">Tax-free shopping</span>

Tax-free shopping (TFS) is the buying of goods in another country or state and obtaining a refund of the sales tax which has been collected by the retailer on those goods. The sales tax may be variously described as a sales tax, goods and services tax (GST), value added tax (VAT), or consumption tax.

A hotel tax or lodging tax in the United States is a tax levied by states, cities or counties against travellers when they rent accommodations in a hotel, inn, tourist home or house, motel, or other lodging, generally unless the stay is for a period of 30 days or more. In addition to sales tax, it is collected when payment is made for the accommodation, and it is then remitted by the lodging operator to the city or county. It can also be called hotel occupancy tax in places like New York City and Texas. Despite its name, it generally applies to the same range of accommodations.

<span class="mw-page-title-main">Air Passenger Duty</span> A tax on flights originating or terminating in the UK

Air Passenger Duty (APD) is an excise duty which is charged on the carriage of passengers flying from a United Kingdom or Isle of Man airport on an aircraft that has an authorised take-off weight of more than 5.7 tonnes or more than twenty seats for passengers. The duty is not payable by inbound international passengers who are booked to continue their journey within 24 hours of their scheduled time of arrival in the UK. If a passenger "stops-over" for more than 24 hours, duty is payable in full.

<span class="mw-page-title-main">Tourism in Iceland</span>

Tourism in Iceland has grown considerably in economic significance in the past 15 years. As of 2016, the tourism industry is estimated to contribute about 10 percent to the Icelandic GDP; the number of foreign visitors exceeded 2,000,000 for the first time in 2017; tourism is responsible for a share of nearly 30 percent of the country's export revenue.

Tourism is one of the leading sources of income, crucial to Egypt's economy. At its peak in 2010, the sector employed about 12% of workforce of Egypt, serving approximately 14.7 million visitors to Egypt, and providing revenues of nearly $12.5 billion as well as contributing more than 11% of GDP and 14.4% of foreign currency revenues.

<span class="mw-page-title-main">Visa policy of mainland China</span> Policy on permits required to enter mainland China

The visa policy of mainland China deals with the requirements which a foreign national must meet to travel to, enter, and remain in the mainland of the People's Republic of China. Several categories of visas are available, depending on the purpose and length of stay. Chinese visas are issued outside China by the Chinese diplomatic missions, and in China by the exit and entry administrations (EEAs) of the county-level public security bureaus (PSBs). Visa exemptions exist for nationals of certain countries based on bilateral agreements and unilateral decisions.

Visa requirements for Canadian citizens are administrative entry restrictions by the authorities of other states placed on citizens of Canada.

A departure tax is a fee charged by a country when a person is leaving the country.

<span class="mw-page-title-main">Economy of Saint Martin (island)</span>

The economy of Saint Martin, divided between the French Collectivity of Saint Martin and the Dutch Sint Maarten, is predominately dependent on tourism. For more than two centuries, the main commodity exports have generally been salt and locally grown commodities, like sugar.

The United Arab Emirates is a federation of seven Emirates, with autonomous federal and local governments. The UAE has historically been a low-tax jurisdiction. The federal government and local governments are entitled to levy taxes on citizens and companies. The federal government currently levies a value added tax, corporate income tax, and excise taxes. Some emirates levy property, transfer, excise and tourism taxes. Some emirates also charge corporate taxes on oil companies and foreign banks.

The passenger movement charge (PMC) is an Australian tax payable by passengers departing Australia on international flights or sea transport, whether or not the passenger intends to return to Australia. The PMC was introduced in July 1995 and was initially described as a charge to partially offset the cost to government of the provision of passenger facilitation at airports, principally customs, immigration and quarantine functions.

<span class="mw-page-title-main">Visa policy of Saudi Arabia</span> Policy on permits required to enter Saudi Arabia

Visitors to Saudi Arabia must obtain a visa, unless they come from one of the visa exempt countries.

<span class="mw-page-title-main">Value-added tax</span> Form of consumption tax

A value-added tax is a consumption tax that is levied on the value added at each stage of a product's production and distribution. VAT is similar to, and is often compared with, a sales tax. VAT is an indirect tax, because the consumer who ultimately bears the burden of the tax is not the entity that pays it. Specific goods and services are typically exempted in various jurisdictions.

<span class="mw-page-title-main">Overtourism</span> Excessive number of tourists

Overtourism is congestion or overcrowding from an excess of tourists, resulting in conflicts with locals. The World Tourism Organization defines overtourism as "the impact of tourism on a destination, or parts thereof, that excessively influences perceived quality of life of citizens and/or quality of visitor experiences in a negative way". This definition shows how overtourism can be observed both among locals, who view tourism as a disruptive factor that increasingly burdens daily life, as well as visitors, who may regard high numbers of tourists as a nuisance.

<span class="mw-page-title-main">Travel during the COVID-19 pandemic</span> Restrictions by countries intended to stop spread of disease

During the COVID-19 pandemic, many countries and territories imposed quarantines, entry bans, or other travel restrictions for citizens of or recent travelers to the most affected areas. Some countries and territories imposed global restrictions that apply to all foreign countries and territories, or prevented their own citizens from travelling overseas.

<span class="mw-page-title-main">Impact of the COVID-19 pandemic on tourism</span>

The COVID-19 pandemic has impacted the tourism industry due to the resulting travel restrictions as well as slump in demand among travelers. The tourism industry has been massively affected by the spread of coronavirus, as many countries have introduced travel restrictions in an attempt to contain its spread. The United Nations World Tourism Organization estimated that global international tourist arrivals could have decreased by 58% to 78% in 2020, leading to a potential loss of US $0.9–1.2 trillion in international tourism receipts.

References

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  12. 1 2 "What is Departure Tax?". Alternative Airlines. 3 October 2023. Retrieved 7 November 2024.
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