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Tourism Taxes: Implications for Tourism Demand in the UK

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  • Ramesh Durbarry

Abstract

Before one can understand tax implications for the tourism industry, one must understand the sensitivity of tourism demand. Using a recently developed theoretical framework, we model inbound tourism demand in the UK. The results suggest that tourism demand in the UK is very price sensitive and that measures which result in increasing tourism prices will have a significant negative impact on tourist arrivals. It is believed that a reduction in the VAT rate could boost UK's tourism sector, depending on the extent to which a decrease in taxation is passed on in the form of price reductions. The results also suggest that arrivals from neighboring countries are 98% higher than from distant origins; however, expenditure per capita of the former is 52% lower than the latter. We also found that common language between the origin and the destination increases arrivals 7% more than non‐native English‐speaking origins.

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  • Ramesh Durbarry, 2008. "Tourism Taxes: Implications for Tourism Demand in the UK," Review of Development Economics, Wiley Blackwell, vol. 12(1), pages 21-36, February.
    • Handle: RePEc:bla:rdevec:v:12:y:2008:i:1:p:21-36
    DOI: 10.1111/j.1467-9361.2008.00432.x
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    2. Lorde, Troy & Li, Gang & Airey, David, 2014. "Modeling Caribbean Tourism Demand: An Augmented Gravity Approach," MPRA Paper 95476, University Library of Munich, Germany.
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    7. Lizhi Xu & Shouyang Wang & Jingjing Li & Ling Tang & Yanmin Shao, 2019. "Modelling international tourism flows to China: A panel data analysis with the gravity model," Tourism Economics, , vol. 25(7), pages 1047-1069, November.
    8. Sylvain Petit & Neelu Seetaram, 2018. "Measuring the Effect of Revealed Cultural Preferences on Tourism Exports," Post-Print hal-02133249, HAL.
    9. Nicholas Apergis & Chi Keung Lau, 2022. "Hotel Revenue Convergence: Evidence Across Star Hotels in Chinese Provinces," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 50(1), pages 37-51, June.
    10. Georg Gottholmseder, 2008. "Ziele und Optionen der Steuerreform: Reformoptionen für den Bereich der indirekten Steuern," WIFO Studies, WIFO, number 33942, April.
    11. Matthew T. Cole & Ronald B. Davies, 2014. "Royale with Cheese: Globalization, Tourism, and the Variety of Goods," Review of Development Economics, Wiley Blackwell, vol. 18(2), pages 386-400, May.
    12. Nestor M. Arguea & Richard R. Hawkins, 2022. "Florida tourist development tax changes and the risk to hotel revenue," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(6), pages 685-690, December.
    13. Xueying Huang & Yuanjun Han & Xuhong Gong & Xiangyan Liu, 2020. "Does the belt and road initiative stimulate China’s inbound tourist market? An empirical study using the gravity model with a DID method," Tourism Economics, , vol. 26(2), pages 299-323, March.
    14. Jaume Rosselló Nadal & María Santana Gallego, 2022. "Gravity models for tourism demand modeling: Empirical review and outlook," Journal of Economic Surveys, Wiley Blackwell, vol. 36(5), pages 1358-1409, December.
    15. María Santana-Gallego & Francisco Ledesma-Rodríguez & Jorge Pérez-Rodríguez, 2016. "The euro effect: Tourism creation, tourism diversion and tourism potential within the European Union," European Union Politics, , vol. 17(1), pages 46-68, March.
    16. Xinhua Gu & Pui Sun Tam & Chun Kwok Lei & Xiao Chang, 2016. "The Economics of Taxation in Casino Tourism with Cross-border Market Power," Review of Development Economics, Wiley Blackwell, vol. 20(1), pages 113-125, February.
    17. Andrea Saayman & Paolo Figini & Silvio Cassella, 2016. "The influence of formal trade agreements and informal economic cooperation on international tourism flows," Tourism Economics, , vol. 22(6), pages 1274-1300, December.
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