TAXING TOURISM IN DEVELOPING-COUNTRIES

Although tourism is an important industry in many developing countries, where tax revenues are often in short supply, surprisingly little attention has been paid to the taxation of the tourist industry. This paper argues that in principle there is a strong economic case in many, but not all, countries for taxing tourism more than at present, but that the nature of the industry and administrative difficulties severely limit what can be done in practice. This analysis and a review of the fiscal instruments available to most developing countries suggest three main conclusions: first, more attention should be paid to introducing adequate "charging" policies where possible; second, special taxes on hotel accommodation are generally the key to tourist taxation; and third, there is little reason to provide special incentives for investment in the tourist industry.