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Optimal Commodity Taxation in the Presence of Tourists

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  • Nishaal Gooroochurn

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.

Suggested Citation

  • Nishaal Gooroochurn, 2009. "Optimal Commodity Taxation in the Presence of Tourists," International Economic Journal, Taylor & Francis Journals, vol. 23(2), pages 197-209.
    • Handle: RePEc:taf:intecj:v:23:y:2009:i:2:p:197-209
    DOI: 10.1080/10168730902901239
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    References listed on IDEAS

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    1. W. J. Corlett & D. C. Hague, 1953. "Complementarity and the Excess Burden of Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 21(1), pages 21-30.
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    6. Bird, Richard M., 1992. "Taxing tourism in developing countries," World Development, Elsevier, vol. 20(8), pages 1145-1158, August.
    7. Gooroochurn, Nishaal & Milner, Chris, 2005. "Assessing Indirect Tax Reform in a Tourism-Dependent Developing Country," World Development, Elsevier, vol. 33(7), pages 1183-1200, July.
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    9. Randall G. Holcombe, 2002. "The Ramsey Rule Reconsidered," Public Finance Review, , vol. 30(6), pages 562-578, November.
    10. Gooroochurn, Nishaal & Blake, Adam, 2005. "Tourism Immiserization: Fact or Fiction?," Natural Resources Management Working Papers 12144, Fondazione Eni Enrico Mattei (FEEM).
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    Cited by:

    1. Ponjan, Pathomdanai & Thirawat, Nipawan, 2016. "Impacts of Thailand’s tourism tax cut: A CGE analysis," Annals of Tourism Research, Elsevier, vol. 61(C), pages 45-62.

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    Keywords

    Optimal taxation; tourism;

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