Tourist tax

A tourist tax is any form of tax aimed at generating revenue from tourists or the tourism industry.

Tourist taxes are generally a way for governments to generate revenue for the consolidated fund although in some cases they are a hypothecated levy.

Tourist taxes can be used as a way to address the impact that tourism can have on cities such as the increased demand on infrastructure and public services, to address the environmental and sustainable impact of tourism and to ensure an the tax burden is split equitably.

Tourist taxes are also used as a tool to regulate the flow and behaviour of tourists, to provide funds for specific events or projects, used to promote and market the destination or used to diversify the economy of areas reliant on tourism.

Various approaches can be used to target taxes more specifically such as not charging business travellers, only charging foreign nationals, varying the fee on the depending on the duration of the stay, differing the rates depending on mode of arrival or port of entry, or only charging a tax at peak periods.

The process for paying tourist taxes can either be in advance as part of the visa process or through an online portal, directly on arrival or upon hotel check-in, or included as part of a bill or airline ticket.

Types

Hotel tax

Main article: Hotel tax

The most common type of tourist tax in Europe and the United States is to levy a tax on accommodation known as a hotel tax, occupancy tax, lodging tax or bed tax. In most countries the tax is levied by municipal or national governments and is paid in addition to VAT and other taxes.

The implementation of the tax varies from city to city. Reykjavík, for example, charges a flat rate per night, per room whereas Amsterdam charges a fixed percentage of the total accommodation cost. In Paris a fixed fee for the duration of the stay is charges which varies depending of the star rating of the accommodation. Iceland and Romania charge a fixed taxed national-wide where as in Spain and France hotel taxes vary by municipality.

As of 2024, the highest hotel tax in the U.S is in Houston, Texas which is levied at 17% and the highest rate in Europe is Amsterdam where a tax of 12.5% is due.

Arrival tax

Arrival taxes are paid by incoming visitors to a country and are collected either on entry or pre-arrival as part of the visa application process. The tax can either be a fixed fee, for example, NZ$100 for the duration of a stay in New Zealand , or US$200 per day for visitors to Bhutan (thought to be highest form of tourist tax of any kind).

In contrast to hotel taxes, which are usually charged per room, arrival taxes are levied against the individual.

Departure tax

Main article: Departure tax

Simular to arrival taxes, departure taxes are levied at the boarder against visitors to the country upon departure.

As of 2019, Japan charged a 1,000-yen "sayonara tax" to visitors leaving the country with the proceeds being used to fund the 2020 Summer Olympics, which were scheduled to be held in Tokyo. Indonesia charges a departure tax, but it differs depending on the airport.

Although departure taxes are usually charged to foreign tourist leaving their destination country, the Turkish Government have a departure tax only payable by Turkish citizens leaving the country for tourism or business.

Cruise tax

In some jurisdictions, cruise passengers are sometimes subject to different taxes than other types of visitors.

The Netherlands has a specific cruising tax is charged for people staying onboard cruise ships docked in the country. Where as Greece has imposed a Cruise Ship Passenger Levy for cruise passengers visiting certain islands in peak periods.

However, cruise ships receive preferable tax arrangements in other ways, such as onboard restaurant and catering services not being subject to VAT in most tax jurisdictions.

Indirect and other forms of tourist tax

Tourists are subject to other taxes when visiting a country that non-tourists also have to pay. Tourists are expected to pay VAT on goods and services (although some country incentives tourist spending through Tax-free shopping) as well as other forms of non-tourist specific taxes such as the universal departure taxes as is the case with the Air Passenger Duty levied against all air passengers outbound from the UK, The Air Travel Tax in Ireland and the German air passenger taxes.

There are also other instances where tourists are expected to pay a higher tax rate than non-tourists. Tourist attractions can often be priced differently for citizens than for visitors as is the case in much of Asia. Similarly, in Europe cultural sites can sometimes be cheaper or free for EU citizens and full priced for non-EU citizens.

Taxes on restaurants can also be considered a form of tourist tax.

Impact

Tourist taxes are primarily a way of increase revenue for governments as with all other taxes. However, tourist taxes can be used as an effective way of addressing the impact that tourism can have on the city or region and is increasingly being employed to manage the impacts of overtourism and the climate crisis in the areas in which tourist taxes are instituted.

New Zealand's NZ$35 Visitor Conservation and Tourism Levy, Bhutan's Sustainable Development Fee, Greece's Resilience Fee for the Climate Crisis and Bali's tourist tax are all examples of tourist taxes that are ring-fenced for sustainability initiatives. Although not ring fenced in all areas, the revenue of tourist tax is often still used for sustainable purposes. For example, Lake Como used €350,000 from it's hotel tax income for fund the city’s organic waste collection and improve their lakeshore maintenance programme.

Venice and Civita di Bagnoregio are both using entry fees in an attempt to limit tourist numbers by charges a €5 entry. In it's first year the fee has had little impact of visitor numbers and has been seen a failure by some. However, the fee made €1 million in the first 11 days which has been used to improve services for Venice residents.

The Balearic Islands in Spain took the decision in 2024 to use a portion of their tourist tax income to diversify their economy and reduce their dependency on tourism.

Public support for tourist taxes

In March 2023, in response to concerns over National Park funding cuts in the UK, ethical travel company Responsible Travel conducted a survey of 670 UK travellers to see if they would be willing to pay a levy to support nature conservation when visiting a National Park or Area of Outstanding Natural Beauty. Ninety percent of respondents confirmed they would be happy to pay between £2 and £10 per night if proceeds were ringfenced to support local conservation projects.