Optimal Commodity Taxes with Tourist Demand
The existence of country-specific commodities that have to be bought and consumed locally plays an essential role in tourism. This paper discusses how optimal taxation rules are modified when the taxable goods include goods demanded by tourists. The main point is that tax rates can be manipulated to shift some of the tax burden from domestic residents onto tourists. There is indeed a reason why an optimum taxation approach is useful for tourism, as the goods are consumed inside the host country, and discrimination is difficult. This paper combines several scenarios where tourism may be relevant for optimal tax policy. It begins by considering the determinants of tourist demand. Then, the well-known optimal commodity tax rules are modified to include the effect of foreign demand. Tourists are assumed to trade at the same prices as domestic consumers, but to have zero welfare weight. Thus, the government must balance the desire to tax tourists with the deadweight loss suffered by its own residents. The government should raise some taxes, when tourism begins. Tourism-oriented goods with low price elasticities should bear the highest taxes. However, tourism-related pollution cannot be taxed at prohibitive rates or tourist revenue would be lost altogether. Possible extensions are introduced, for example competition among destination countries. Should tourism dependent countries that are geographical neighbours and substitutes have closely linked tax systems? What kind of tax policy is best when the tourist destinations serve as complements to each other?
Volume (Year): 4 (2004)
Issue (Month): 2 (July)
|Contact details of provider:|| Postal: Strelnieku iela 4a, Riga, LV-1010|
Phone: +371 67039320
Fax: +371 67039318
Web page: http://www.biceps.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alfaro, Laura & Chanda, Areendam & Kalemli-Ozcan, Sebnem & Sayek, Selin, 2004.
"FDI and economic growth: the role of local financial markets,"
Journal of International Economics,
Elsevier, vol. 64(1), pages 89-112, October.
- Sebnem Kalemli-Ozcan & Laura Alfaro & Selin Sayek & Areendam Chanda, 2002. "FDI and Economic Growth: The Role of Local Financial Markets," Macroeconomics 0212007, EconWPA.
- Chow, Peter C. Y., 1987. "Causality between export growth and industrial development : Empirial evidence from the NICs," Journal of Development Economics, Elsevier, vol. 26(1), pages 55-63, June.
- De Gregorio, Jose, 1992.
"The effects of inflation on economic growth : Lessons from Latin America,"
European Economic Review,
Elsevier, vol. 36(2-3), pages 417-425, April.
- Jose De Gregorio, 1991. "The Effects of Inflationon Economic Growth; Lessons From Latin America," IMF Working Papers 91/95, International Monetary Fund.
- De Gregorio, Jose, 1992. "Economic growth in Latin America," Journal of Development Economics, Elsevier, vol. 39(1), pages 59-84, July.
When requesting a correction, please mention this item's handle: RePEc:bic:journl:v:4:y:2004:i:2:p:25-38. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lelde Jakobsone)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.