An insight into tourism taxation

Tourism taxation is a policy instrument used by national and local authorities. It is used with the aim of correcting for the negative externalities caused by tourism, enhancing tourism sustainability, and financing the provision of public services that are used not only by residents but also by tourists.

Reasoning behind structures of tourism taxes

From a broad perspective government agencies often consider tourism taxes to be necessary sources of revenue to support their ambitious economic and social projects and reducing the negative social-environmental externalities induced by tourism flows. On the other hand, many tourism operators and active lobbyists often strongly denounce high taxes as being inefficient and undermining the long-term prosperity of a tourism destination. Therefore, the actual taxation policy is the result of a complicated political bargaining process in which various interest groups lobby for favourable policies for themselves. This interesting process makes me curious to study the reasoning behind structures of tourism taxes.

Types of tourism taxation

There are many different types of taxes levied on tourists including transport taxes such as airport and harbour charges and fees, charges on travel tickets and public transport services, excise duties on fuel, highway tolls. However, the most widely applied is the accommodation tax which is paid by non-residents who stay overnight at a tourist destination other than their hometown. In the Netherlands, the underlying thought of the accommodation tax is that non-residents also use municipal facilities while the distribution of the general grant from the municipal fund does not take this into account. The rate of the accommodation tax is usually a fixed amount per night which sometimes depends on the type of accommodation. A percentage of the overnight price or an amount depending on the number of stars of a hotel also occur. When reviewing the designation of taxes, choices can be made in effectiveness, equity, simplicity, competitiveness and adequacy.

Blessing or a curse?

Although, municipalities might consider tourism tax to be beneficial to the community as a whole, it has not been considered by the accommodation industry at large to be a particularly welcome innovation. According to HISWA-RECRON (2019) one point of critique in the Netherlands is that municipalities disproportionately burden tourists within the accommodation industry with a tax on its product (overnight stay). Tourism sectors such as museums, catering, retail and other businesses also enjoy tourism, but their products are not extra taxed. Another commonly heard comment is that the accommodation tax is used by municipalities as cash cow. 

Research about how tourism taxes are structured

Our project manager assistant, Sjors Schuurmans, does not want to start a debate on whether tourism tax should be used. He is curious to study the reasoning behind the structures of the tourism tax in Dutch municipalities and the challenges that come along with it. Your opinion, advice, feedback or remark is more than welcome.  

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