Open AccessThe Effect of Tourism Taxation on International Arrivals to a Small Tourism-Dependent Economy
Author(s) -
Festus Fatai Adedoyin,
Neelu Seetaram,
Marta Disegna,
George Filis
Publication year - 2021
Publication title -
journal of travel research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.403
H-Index - 132
eISSN - 1552-6763
pISSN - 0047-2875
DOI - 10.1177/00472875211053658
Subject(s) - tourism , tax revenue , economics , revenue , panel data , government (linguistics) , tax policy , government revenue , ordinary least squares , tax reform , public economics , business , economy , finance , geography , linguistics , philosophy , archaeology , econometrics
This paper examines the effects of tax policies on international tourist arrivals to the Maldives using the fully modified ordinary least squares (FMOLS) panel data method. The Maldives is chosen as a case study because the nation is heavily dependent on tourism and earn up to 70% of total government revenue in tourism tax. As expected, the estimated tax elasticities show that tourism tax adversely influences inbound travel, but significant differences across source markets are observed. Specifically, a 10% increase in tourism tax reduces demand by 5.4%. The degree of responsiveness of tourism demand to changes in taxes is essential for tourism policy since a change in the cost of visiting a destination resulting from a change in tourism tax policies affects inbound tourism demand. Consequently, the effectiveness of current fiscal policies is a matter of concern for attracting international tourists to the Maldives.