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A Note On the Effect of Changes in Ad Valorem Tax Rates On Net Revenue of Firms: an Application To the Hotel Room Tax

Author

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  • Eric Iksoon Im

    (University of Hawaii at Hilo)

  • Marcia Sakai

    (University of Hawaii at Hilo)

Abstract

This article employs comparative static analysis to derive a general expresscon for Abstract the effect of an increase in the ad valorem tax rate on a good on the net revenue of firms. The magnitude of this effect is expressed as a function of the initial levels of the tax rate and net revenue of taxed firms as well as the elasticities of supply and demand for the good. The authors' results applied to the hotel industry suggest caution in relying heavily on revenues derived from hotel room taxes. Increases in hotel room tax rates may have large negative effects on the financial viability of the industry.

Suggested Citation

  • Eric Iksoon Im & Marcia Sakai, 1996. "A Note On the Effect of Changes in Ad Valorem Tax Rates On Net Revenue of Firms: an Application To the Hotel Room Tax," Public Finance Review, , vol. 24(3), pages 397-402, July.
    • Handle: RePEc:sae:pubfin:v:24:y:1996:i:3:p:397-402
    DOI: 10.1177/109114219602400306
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    Cited by:

    1. Asma BEN OTHMEN, 2014. "De la mise à contribution des bénéficiaires au financement de la préservation des espaces naturels : tarification de l’accès ou augmentation de taxe?," Cahiers du GREThA (2007-2019) 2014-10, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).

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