Tourism Tax and The Hidden Cost of World Exploration

“Oh, the places you’ll go!”

Dr. Seuss

People have long been drawn to travel. We seek adventure in new places to create cherished memories, experience beauty, and provide a respite from our everyday busy lives. In fact, the love for exploration is such that tourism contributes to over 7% of the global economy. However, with billions of individuals around the world, our wanderlust can inadvertently lead to environmental and community stress.

Enter Tourism Tax. Tourism tax is a fee paid by tourists to a city or region they visit, and serves to mitigate the negative impact of overtourism. Like all policies in the complex world of taxation, the effectiveness of tourism tax is an ongoing debate. Many question its merits, while others see it as the most reasonable response. Despite ongoing controversy, this tax continues to evolve, with countries worldwide deliberating its benefits and drawbacks.

What is Tourism Tax?

A tourist tax is a fee charged to visitors by a city, state or country, paid in the form of an itemized inclusion to a purchase or a set fee. Each country has its own tourism tax policies, and some even differ by city or state.

New Zealand likes to keep things simple, and require most travelers to pay an International Visit Conservation and Tourism Levy (IVL) upon arrival. Who exactly needs to pay this fee depends upon the type of visa and the purpose of visitation, but Australians are exempt.

Japan prefers to charge not when a tourist comes, but when they leave.

Regardless of their tax bracket, nationality, or annual income, everyone will be uniformly taxed 1,000 yen (around US $9.00) each time they depart from Japan. To give an example: A family of five tourists visiting Japan will be taxed a total of 5,000 yen (around US $45.00) upon their departure.

All You Need to Know About Japan’s New Departure Tax that Started in 2019!

Some countries, like the Czech Republic and Indonesia, only apply tourism tax to Prague and Bali, respectively. And in the USA, only certain states charge a tourist fee, which is typically in the form of a hotel/occupancy tax.

Why Are Tourist Taxes Imposed?

Tourism tax might sound like just another money-grabbing tactic, but there are reasons behind this additional levy. As more and more people travel, there becomes increased risk of damage.

This is not to say that tourism is all-together negative. The industry of travel is an essential part of the economy, especially in Europe and the United States. In 2022 alone, Travel & Tourism contributed more than $363.4 billion USD to the United States, and a whopping $579.2 billion USD to Europe. However, there can be too much of a good thing.

Increased foreign visitors – especially during peak season from July-August – can negatively impact the culture, architecture, and infrastructure of many popular destinations.

Take Maya Beach, Thailand, for example. A beautiful sea cove made popular by a cult classic Leonardo DiCaprio film, The Beach, became so overcrowded that Thailand instated an indefinate tourist ban in 2018 to preserve the, “Ecosystem and the beach’s physical structure … until natural resources return to normal.”

Further increasing the negative consequences of tourism are, simply, the behaviors and attitudes of some tourists. In early August, 2023, the Fifth Deadliest Wildfire in US History devastated the island of Maui, Hawaii, killing at least 115 people. In the beginning of this devastation, Lahaina county – the area most impacted by the wildfires – asked visitors to leave as soon as possible. Many thousands heeded this instruction. Others did not, and still more tourists flew into Maui while the fires raged. There is no doubt that much of Hawaii’s revenue runs on tourism, with many local business owners depending upon visitors for their income, but the double-edged sword often comes in the form of ignorance and disrespect of the locals and their land.

So what can tourist taxes do about this? While the actual efficacy of tourism tax is up for debate, its purpose is to combat the impacts of overtourism by alloting additional funding toward maintaining, improving, and supporting the destinations people love to visit. This can come in the form of improving the wear and tear of architecture, financing public transport services, and helping local businesses earn more revenue.

How Does Tourism Tax Benefit Travelers?

While traveling is never cheap and paying more in taxes is never fun, there are many potential benefits to tourism tax that not only help the locals, but the visitors. The Bevan Foundation is very much pro-tourism tax, arguing that the benefits largely outweigh the cons.

“A tourist tax would help to reflect the true costs of tourism. Tourists … generate extra costs from things like clearing up litter, providing car parking, keeping beaches clean, building public footpaths and so on … These costs are picked up by the public purse, as part of their statutory duties, while the main benefits of tourists go to tourism businesses themselves.”

Bevan Foundation

https://www.bevanfoundation.org/views/three-reasons-to-introduce-a-tourist-tax/

To keep the allure of travel alive, it pays to keep things clean and accessible. No one wants to visit a beach littered with trash or see natural wonders and landmarks eroded by too much foot traffic and too few resources.

What About the Cons?

No initiative is perfect, even with the best intentions in mind. With the cost of living rising all over the world, some fear that adding and raising tourism taxes will discourage too many visitors. However, most research indicates that this is not the case. Ged Brown, founder of Low Season Traveller, states, “There is no evidence at all that the imposition of tourism taxes has ever been successful in its aim to reduce tourism numbers. Additionally, the prices of flights and accomodation are already massively inflated during the peak times of the year when tourism taxes are typically deployed anyway … and it has never reduced demand.”

For those areas of the world that are not equipped to handle millions of tourists at a time, like Bhutan or Bali, tourism tax isn’t going to solve the problem, but it may help ease the burden. That is, if the funds accrued are allocated to the correct channels. Another major concern highlighted in tourism tax is a lack of expenditure transparency. “If the money just goes into a general pot because local finances are strained … that’s not a smart way to go,” says Tim Fairhurst, secretary general of the nonporift European Tourism Association (ETOA).

Perhaps the biggest critique over tourism taxes is that it does not address the underlying issues of overtourism. Rather, it’s a band-aid measure.

“Over-tourism is ‘tourism mismanagement’,” says Ged Brown. “It is too many tourists in the same place, at the same time, to such a degree that the experience becomes a negative one for the traveller and, equally, for the locals living there.”

Still other critics surmise that overtourism is not a lack of government understanding or poor planning, but stems from cheap aviation and cruises, advancements in the hospitality industry from online marketplaces like Airbnb, and increasing population growth and disposable income.

What Countries Have Tourism Tax?

Many countries have already implemented tourism tax in recent years, but still more are following in their footsteps. In this chart, you’ll find popular vacation locations that levy tourist taxes, as well as those who are planning to do so in 2023 and 2024.