Following the news of Manchester becoming the first city in the United Kingdom to impose a tourist tax, we sat down to scrutinise the potential advantages and disadvantages of such an action in Africa/Nigeria.
What, though, is a tourist tax?
A tourist tax is a levy placed on travellers who visit an area. The tax is typically charged as a percentage of the room rate and is collected by the accommodation provider on behalf of the local government.
In most places, international tourists bear the biggest brunt of a tourist tax policy.
What advantages can a tourist tax have if implemented?
First and foremost, it generates revenue. A tourist tax can generate revenue for the local government which can give them more control over tourism development in their area.
This revenue can be used to fund local infrastructure, environmental protection, and other community initiatives. This extra income eases the burden on taxpayers and helps ensure that tourists are contributing to the local economy.
Second, it encourages higher-value tourists. A tourist tax can discourage budget travellers and attract higher-value travellers who are willing to pay for a more luxurious experience. This will increase the average spending and support higher-value tourism businesses.
This tourist tax can be used as a measure to rate the quality of accommodation and tourist services. It can equally be used to fund inspection and certification programs to ensure that tourists receive a high standard of service and accommodation.
Disadvantages of a tourist tax
While a well-implemented tourist tax has many benefits, there could still be disadvantages.
The most common is that it could discourage tourism. A tourist tax may increase the cost of travel and accommodation, making a destination less competitive and attractive to visitors. This may particularly affect budget travellers or families who may not be able to afford the additional cost of the tax and may be deterred from visiting a destination.
While most countries and cities in Europe have a tourist tax of less than €10 per day, in the United States, tourist tax may reach up to $20 on average. However, in Bhutan, it can be as high as $200 per day. This tax is tagged a “Sustainable Development Fee”. Though this amount is inclusive of several perks, many of us may agree that this is quite a large sum to fork out at once. Interestingly, Indian nationals only have to pay a 1,200 INR ($15) fee to visit Bhutan.
Therefore, it is no surprise that as of 2019, Indian travellers to Bhutan numbered 230,000. The next highest were Bangladesh and the United States at just 13,000 and 12,000 people respectively. It is safe to conclude that high tourist taxes have discouraged travellers from other countries.
How practicable is a tourist tax in Africa today?
Tourist taxes may be difficult to implement. Collecting and enforcing a tourist tax can be challenging, particularly in areas with a large informal accommodation sector or where tax evasion is common.
Additionally, it may be challenging to define who is required to pay the tax, particularly if the tax is based on the number of nights stayed. In areas with undefined or corrupt governance structures, non-state actors may begin to enforce such collections and divert the funds to their pockets, which goes against the very reason why the tourist tax was set up.
The size and nature of the tourism industry can also impact the practicability of a tourist tax. A tax may be more feasible in destinations that attract a high volume of tourists, as the revenue generated can be significant.
However, in smaller tourist destinations, the tax may be more challenging to implement and collect.
Lessons learnt:
- Developing our tourism sector locally and making it attractive to travel will make it easier to implement a tourist tax.
- If a tourist tax is implemented, such an amount should not be on the high side in order to encourage people to travel.
- Proper structures should be put in place to ensure these funds are collected through the right channels and not embezzled, to get the best out of this arrangement.