15 - Why Tourists Should Pay Local Taxes
Published online by Cambridge University Press: 13 May 2022
Summary
Introduction
Tourism is one of the world's largest industries. It is responsible for 10 per cent of global GDP, and 1 in 10 jobs (WTTC, 2020). Although research that begin the late 1970s, notably the seminal work of Mathieson and Wall (1982), has highlighted its negative influence, especially in socio-cultural and environmental domains, it has clear economic benefits for many destinations. Even in the era of ‘overtourism’ (Goodwin, 2017), when some cities and resorts face the challenge of managing too many tourists, other destinations are fighting for more visitors, and tourism is still seen as a very important factor in local development. Its role has become especially apparent during the COVID-19 crisis, as it is clear that a lack of tourists is a significant economic problem in many places around the world.
Although there is no doubt that tourism influences the local economy, little is known about the relationship with direct local taxation. In general, tourism taxation is discussed from the point of view of competitiveness, or demand for travel, that is, the business perspective, rather than a municipal perspective (Sheng and Tsui, 2009; OECD, 2014; Heffer-Flaata, Voltes-Dorta and Suau-Sanchez, 2020). However, the unprecedented development of tourism worldwide has increased pressure on not only services and facilities, which are often maintained by local governments, but also infrastructure that ensures visitor safety and security, or protects the natural environment. Of course, tourists pay to stay in hotels and eat in restaurants, and so forth, but should they also pay direct taxes to the local municipality? In many places they already do. In this chapter, I argue that tourist taxes are not only necessary but also fair. I draw upon a number of practical examples, and illustrate my argument using the Polish variant of a tourist tax.
Why should tourists pay local taxes?
The answer to this question is closely related to the issue of why local taxes are important. The main argument is that local taxes are necessary when markets are inefficient. The latter particularly applies in the following situations: to the supply of public and social goods; where there is a natural monopoly; and where there are externalities (Swianiewicz, 2004, 2011). These issues are widely debated in the economic literature, and will not be discussed further in this chapter.
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- Local Government in EuropeNew Perspectives and Democratic Challenges, pp. 270 - 283Publisher: Bristol University PressPrint publication year: 2021