Tourism and tax revenue: evidence from stay-over tourists in the Eastern Caribbean

Preeya Mohan and Eric Strobl

Current Issues in Tourism, 2024, vol. 27, issue 8, 1185-1207

Abstract: This paper investigated the impact of international stay-over arrivals on tax revenue for tourism-dependent Small Island Developing States (SIDS). To this end, we constructed a unique monthly panel data set of stay-over arrivals and tax revenue and its various components for the period 2002–2018 for Eastern Caribbean SIDS. A Bartik-type instrumental variables estimator exploiting differences in the exposure to and the extent of shocks in the origin markets was used to quantify the impact of stay-over arrivals on tax revenue and its different sources. Our results showed a large cumulative positive elasticity to tourism arrivals of 26.98% for total revenue, 26.86% for goods and services revenue, 23.62% for international trade and transactions revenue, 20.5% for income and profits revenue and 5.54% for property revenue. The findings demonstrate the region’s strong dependence on tourism for government income.

Date: 2024
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DOI: 10.1080/13683500.2023.2202307

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