Optimal Commodity Taxation in the Presence of Tourists

Nishaal Gooroochurn

International Economic Journal, 2009, vol. 23, issue 2, 197-209

Abstract: This paper sets up a simple extension of the basic Ramsey model to include tourism and it provides a theoretical analysis of the efficiency, equity and disincentive of work effects of commodity taxation in the presence of tourists. Tourism is a special export commodity for which the effect of a commodity tax is a mixture of domestic and export tax effects. It is found that commodity taxation has a lower marginal excess burden with tourists than without, although this may not be the case when tourist arrival is endogenised. We also found that taxing tourism has a positive equity effect because domestic demand for tourism products is mostly from richer household groups. Finally, since tourism products are complementary to leisure, taxing tourism has also a positive disincentive of work effect.

Keywords: Optimal taxation; tourism (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:taf:intecj:v:23:y:2009:i:2:p:197-209

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DOI: 10.1080/10168730902901239

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