Commodity Taxation in the Presence of Tourists

Nishaal Gooroochurn and Thea Sinclair

Tourism Economics, 2008, vol. 14, issue 4, 839-856

Abstract: This paper investigates the welfare effect of commodity taxation on the presence of tourists. Higher demand from tourists increases tax revenue, and hence welfare, but on the other hand, the reduction in their consumer surplus is not accounted for in domestic welfare. Hence, the presence of tourists causes a lower deadweight cost of taxation. Two main scenarios are investigated. In the first, the authors raise the tax rate on commodities with a tourism demand component. It is found that the welfare level can increase if tourism demand is high enough and/or tourism demand is more inelastic than domestic demand. In the second scenario, tourism demand is increased for commodities which are already taxed and it is found that welfare always increases. Both scenarios are investigated under the fixed and the variable producer price assumption and, in the latter case, a high price elasticity of supply tends to generate positive welfare change.

Keywords: taxation; welfare effect; tourism demand (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.5367/000000008786440184 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:toueco:v:14:y:2008:i:4:p:839-856

DOI: 10.5367/000000008786440184

Access Statistics for this article

More articles in Tourism Economics
Bibliographic data for series maintained by SAGE Publications ().