Governments Eye Up Tourist Taxes

April 16, 2012 International Tax Cooperation

Taxation on TouristsIn an attempt to create new revenue streams, governments and tax authorities around the world are showing increasing interest in implementing more taxes on the tourist industry, but any steps to introduce new taxes are being met with a rising level of criticism from operators in the tourism industries.

Tourism taxes are being frequently considered by governments around the world as a measure to plug spiraling budget gaps, with New Zealand, the UK and Bulgaria currently seeing debates on the topic. In recent times various forms of tourist taxes were implemented in Italy, the USA, Canada, and UK, joining countries like Austria, Germany, the UK, Kenya, France, and Moldova, which already impose extra taxes on tourist.

Over the weekend, representatives of the tourist industry of New Zealand spoke out against newly proposed plans by two local governments in the country to impose a NZD 0.50 fee on each tourist staying in local hotels, motels or holiday parks. The local Councils are justifying the proposals, saying that the extra revenues would be used to upgrade local transport infrastructure and will provide more funding for the upkeep of national parks, walkways and tourist facilities. However, both the Motel Association of New Zealand and the New Zealand Tourism Industry Association oppose the idea, and claimed that such a levy would be hard to collect and administer, and would lead to damage of New Zealand’s image as a world class international travel destination.

In the latest budget announcement of the UK the government announced that from October 2012 the sale of holiday caravans will no longer be exempt from Value Added Taxes. Caravan park owners across the country are objecting to the move, saying that it would reduce the use of caravan parks by over 30 percent and cripple the entire sector. According to representatives of the tourist industry, the tax would persuade some domestic tourists to travel overseas, and would also dissuade international visitors from staying at UK holiday homes or holiday parks.

Earlier last year, the government of Bulgaria proposed a change to the taxation of accommodation in the country, moving from a fixed “tourist tax” to a levy based on the occupancy rate of the hotel or motel, with the assumption that all businesses experience at least a 30 percent occupancy every night. The proposed tax faced significant opposition from the industry, and was referred to the constitutional court by opposition parties. Last week the court ruled that the new tax was unconstitutional as it taxed “hypothetical revenues”. Following the decision, the Deputy Economy Minister Ivo Marinov said that the government will now investigate new tax measures for hotel owners.

Photo by Ed Yourdon