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Tourism taxation should be carefully measured,

modelled, monitored and assessed before any

political tax reform is implemented.

Taleb Rifai

We are living in an era of travel. The tourism sector enjoyed its seventh consecutive year of above-average growth in

2016 as the number of international tourists, which back in 1950 numbered just 25 million, surpassed 1.2 billion. All

around the globe, millions travel within their own countries and across borders and there is almost nowhere in the world

that is not travelled to.

Today the sector contributes 10% of the world’s GDP and as many as one in every eleven jobs globally. Exports from

international tourism have swelled from only U$2 billion in 1950 to U$1.5 trillion in 2015. This equates to 7% in global

trade, a larger contribution than from any other export sector except fuels and chemicals. In Europe tourism has been

instrumental in supporting economic recovery and the generation of new jobs.

Beyond the direct impact, tourism reaches into many other sectors, such as construction, manufacturing and IT services,

having a multiplier effect along the value chain. Tourism is creating jobs for millions at a time when the failure to provide

hope for a better future to people of all regions is one of our biggest global challenges. It is estimated that every job in

the tourism sector creates about 1.5 additional or indirect jobs in the tourism-related economy. The sector’s wide reach

also stimulates entrepreneurship and growth of micro, small and medium-sized enterprises (MSMEs). MSMEs are the

sector’s main innovators and sources of economic diversification, as well as being major job creators across sectors.

Yet, tourism’s role in employment generation and entrepreneurship is often underestimated and undervalued in policy

formulation and implementation. This includes the forming, or reforming, of tourism taxation systems and the analysis

of its impacts in terms of job creation. A good taxation system needs to be equitable to reduce tax avoidance, and

efficient without affecting the allocation of resources. A tourism tax regime that is sound, transparent and efficient can

support good investments to assist a country’s development in socio-cultural and political terms, as well as in economic

competitiveness and employment. The better designed and more holistic the tourism taxation policy is, the more the

environmental, socio-cultural and economic benefits – and the fewer the costs – generated for hosts.

There is no single approach for sustainable and competitive tourism taxation in the long-term. Destinations differ in

their stages of tourism development, political and legal systems and institutions, and overall development priorities.

Their idiosyncrasies have to be carefully and effectively measured, and their measurements analysed holistically, when

establishing or reforming taxation policies. A holistic system and an optimal taxation policy in tourism development

should account for tourism’s role within the larger economy, its economic, environmental and socio-cultural benefits as

well as its potential costs.

Therefore, tourism taxation should be carefully measured, modelled, monitored and assessed before any political tax

reform is implemented. Applying models that provide strong evidence for decision-makers at any given destination is

the most reliable and feasible option in attaining sustainable, resilient and competitive tourism and overall development.

We much welcome this report by HOTREC as we trust it will provide an important contribution to the ongoing discussion

on taxation and its impact on competitiveness in the tourism sector, and particularly to the pressing and ongoing

challenge of job creation. I would like to thank HOTREC for its continuous contribution to advancing tourism knowledge

and maintaining Europe’s position as the world’s leading tourism region and global shepherd of a more sustainable and

competitive sector.

HOTREC - Report on the benefits of low VAT on job creation and competitiveness in the European Union